We're Watching These Trends At Hyundai Autoever (KRX:307950)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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 Hyundai Autoever (KRX:307950) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Hyundai Autoever, this is the formula:

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

0.13 = ₩85b ÷ (₩1.1t - ₩420b) (Based on the trailing twelve months to September 2020).

Therefore, Hyundai Autoever 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.

View our latest analysis for Hyundai Autoever

Above you can see how the current ROCE for Hyundai Autoever compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Hyundai Autoever.

What Can We Tell From Hyundai Autoever's ROCE Trend?

There hasn't been much to report for Hyundai Autoever's returns and its level of capital employed because both metrics have been steady for the past one year. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Hyundai Autoever doesn't end up being a multi-bagger in a few years time.

The Bottom Line

In summary, Hyundai Autoever isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 88% over the last year, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Hyundai Autoever, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Hyundai Autoever may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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