U.I.DisplayLtd (KOSDAQ:069330) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So when we looked at U.I.DisplayLtd (KOSDAQ:069330) and its trend of ROCE, we really liked what we saw.

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 U.I.DisplayLtd, this is the formula:

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

0.081 = ₩2.3b ÷ (₩44b - ₩16b) (Based on the trailing twelve months to March 2024).

Thus, U.I.DisplayLtd has an ROCE of 8.1%. In absolute terms, that's a low return but it's around the Electronic industry average of 6.9%.

See our latest analysis for U.I.DisplayLtd

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 U.I.DisplayLtd has performed in the past in other metrics, you can view this free graph of U.I.DisplayLtd's past earnings, revenue and cash flow.

What Can We Tell From U.I.DisplayLtd's ROCE Trend?

We're delighted to see that U.I.DisplayLtd is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 8.1% on its capital. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

In summary, we're delighted to see that U.I.DisplayLtd has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 20% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing, we've spotted 1 warning sign facing U.I.DisplayLtd that you might find interesting.

While U.I.DisplayLtd 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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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.

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