What Can The Trends At Nuri Telecom (KOSDAQ:040160) Tell Us About Their Returns?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Speaking of which, we noticed some great changes in Nuri Telecom's (KOSDAQ:040160) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Nuri Telecom, this is the formula:

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

0.18 = ₩15b ÷ (₩123b - ₩39b) (Based on the trailing twelve months to September 2020).

So, Nuri Telecom has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Communications industry average of 7.2% it's much better.

See our latest analysis for Nuri Telecom

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Nuri Telecom has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Nuri Telecom is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 18%. The amount of capital employed has increased too, by 63%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Nuri Telecom's ROCE

To sum it up, Nuri Telecom has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Astute investors may have an opportunity here because the stock has declined 10% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we've found 2 warning signs for Nuri Telecom that we think you should be aware of.

While Nuri Telecom 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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