There's Been No Shortage Of Growth Recently For UJU Electronics' (KOSDAQ:065680) Returns On Capital

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at UJU Electronics (KOSDAQ:065680) so let's look a bit deeper.

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

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. Analysts use this formula to calculate it for UJU Electronics:

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

0.047 = ₩11b ÷ (₩303b - ₩75b) (Based on the trailing twelve months to March 2024).

Thus, UJU Electronics has an ROCE of 4.7%. Ultimately, that's a low return and it under-performs the Electronic industry average of 6.2%.

Check out our latest analysis for UJU Electronics

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

The Trend Of ROCE

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.7%. The amount of capital employed has increased too, by 27%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From UJU Electronics' ROCE

All in all, it's terrific to see that UJU Electronics is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 90% return over the last five years. In light of that, we think it's worth looking further into this stock because if UJU Electronics can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for UJU Electronics you'll probably want to know about.

While UJU Electronics 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.