We're Watching These Trends At UJU Electronics (KOSDAQ:065680)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Although, when we looked at UJU Electronics (KOSDAQ:065680), it didn't seem to tick all of these boxes.

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

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. To calculate this metric for UJU Electronics, this is the formula:

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

0.086 = ₩17b ÷ (₩261b - ₩66b) (Based on the trailing twelve months to September 2020).

So, UJU Electronics has an ROCE of 8.6%. In absolute terms, that's a low return, but it's much better than the Electronic industry average of 5.6%.

See our latest analysis for UJU Electronics

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 UJU Electronics has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for UJU Electronics' returns and its level of capital employed because both metrics have been steady for the past five years. 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 UJU Electronics doesn't end up being a multi-bagger in a few years time.

In Conclusion...

We can conclude that in regards to UJU Electronics' returns on capital employed and the trends, there isn't much change to report on. Yet to long term shareholders the stock has gifted them an incredible 134% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to know some of the risks facing UJU Electronics we've found 2 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

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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