We Like These Underlying Trends At SHINSEGAE Information & Communication (KRX:035510)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at SHINSEGAE Information & Communication (KRX:035510) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on SHINSEGAE Information & Communication is:

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

0.13 = ₩27b ÷ (₩268b - ₩55b) (Based on the trailing twelve months to September 2020).

So, SHINSEGAE Information & Communication has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 11% generated by the IT industry.

See our latest analysis for SHINSEGAE Information & Communication

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

What Does the ROCE Trend For SHINSEGAE Information & Communication Tell Us?

We like the trends that we're seeing from SHINSEGAE Information & Communication. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 22%. So we're very much inspired by what we're seeing at SHINSEGAE Information & Communication thanks to its ability to profitably reinvest capital.

The Bottom Line On SHINSEGAE Information & Communication's ROCE

In summary, it's great to see that SHINSEGAE Information & Communication can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 37% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you want to continue researching SHINSEGAE Information & Communication, you might be interested to know about the 1 warning sign that our analysis has discovered.

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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