Returns At Daejoo Electronic Materials (KOSDAQ:078600) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Daejoo Electronic Materials (KOSDAQ:078600) and its trend of ROCE, we really liked what we saw.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Daejoo Electronic Materials is:

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

0.084 = ₩26b ÷ (₩621b - ₩309b) (Based on the trailing twelve months to June 2025).

So, Daejoo Electronic Materials has an ROCE of 8.4%. In absolute terms, that's a low return, but it's much better than the Electronic industry average of 6.4%.

View our latest analysis for Daejoo Electronic Materials

Above you can see how the current ROCE for Daejoo Electronic Materials compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Daejoo Electronic Materials .

So How Is Daejoo Electronic Materials' ROCE Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 8.4%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 132%. 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.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 50% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

Our Take On Daejoo Electronic Materials' ROCE

To sum it up, Daejoo Electronic Materials has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Like most companies, Daejoo Electronic Materials does come with some risks, and we've found 2 warning signs that you should be aware of.

While Daejoo Electronic Materials 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.