UANGEL (KRX:072130) Might Have The Makings Of A Multi-Bagger

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, UANGEL (KRX:072130) looks quite promising in regards to its trends of return on capital.

Understanding 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. Analysts use this formula to calculate it for UANGEL:

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

0.0054 = ₩315m ÷ (₩64b - ₩5.6b) (Based on the trailing twelve months to September 2024).

Thus, UANGEL has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the IT industry average of 7.8%.

See our latest analysis for UANGEL

Historical performance is a great place to start when researching a stock so above you can see the gauge for UANGEL's ROCE against it's prior returns. If you're interested in investigating UANGEL's past further, check out this free graph covering UANGEL's past earnings, revenue and cash flow.

What Can We Tell From UANGEL's ROCE Trend?

UANGEL has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 0.5% on its capital. In addition to that, UANGEL is employing 53% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Our Take On UANGEL's ROCE

In summary, it's great to see that UANGEL has managed to break into profitability and is continuing to reinvest in its business. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing, we've spotted 3 warning signs facing UANGEL that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.