NewFlex Technology (KOSDAQ:085670) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, NewFlex Technology (KOSDAQ:085670) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for NewFlex Technology:

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

0.17 = ₩18b ÷ (₩157b - ₩52b) (Based on the trailing twelve months to September 2024).

Thus, NewFlex Technology has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 6.9% it's much better.

Check out our latest analysis for NewFlex Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for NewFlex Technology's ROCE against it's prior returns. If you'd like to look at how NewFlex Technology has performed in the past in other metrics, you can view this free graph of NewFlex Technology's past earnings, revenue and cash flow.

How Are Returns Trending?

We're delighted to see that NewFlex Technology 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 17% on its capital. While returns have increased, the amount of capital employed by NewFlex Technology has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.

The Bottom Line

In summary, we're delighted to see that NewFlex Technology has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 160% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, NewFlex Technology does come with some risks, and we've found 1 warning sign that you should be aware of.

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.

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.