Samsung SDS' (KRX:018260) Returns On Capital Not Reflecting Well On The Business

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Samsung SDS (KRX:018260) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Samsung SDS:

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

0.087 = ₩943b ÷ (₩13t - ₩2.4t) (Based on the trailing twelve months to September 2025).

So, Samsung SDS has an ROCE of 8.7%. Even though it's in line with the industry average of 9.1%, it's still a low return by itself.

See our latest analysis for Samsung SDS

Above you can see how the current ROCE for Samsung SDS compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Samsung SDS .

What Can We Tell From Samsung SDS' ROCE Trend?

When we looked at the ROCE trend at Samsung SDS, we didn't gain much confidence. Around five years ago the returns on capital were 12%, but since then they've fallen to 8.7%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

In Conclusion...

To conclude, we've found that Samsung SDS is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 7.7% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you're still interested in Samsung SDS it's worth checking out our FREE intrinsic value approximation for A018260 to see if it's trading at an attractive price in other respects.

While Samsung SDS isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.