CyberOne (KOSDAQ:356890) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, CyberOne (KOSDAQ:356890) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on CyberOne is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.10 = ₩4.0b ÷ (₩49b - ₩8.4b) (Based on the trailing twelve months to September 2024).

Therefore, CyberOne has an ROCE of 10%. On its own, that's a standard return, however it's much better than the 7.8% generated by the IT industry.

View our latest analysis for CyberOne

Historical performance is a great place to start when researching a stock so above you can see the gauge for CyberOne's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of CyberOne.

What Does the ROCE Trend For CyberOne Tell Us?

CyberOne's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last one year, the ROCE has climbed 421% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

To sum it up, CyberOne is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 28% over the last three years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 1 warning sign with CyberOne and understanding this should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.