Is There More Growth In Store For Puloon Technology's (KOSDAQ:094940) 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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Puloon Technology (KOSDAQ:094940) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Puloon Technology is:

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

0.0054 = ₩157m ÷ (₩36b - ₩7.4b) (Based on the trailing twelve months to September 2020).

So, Puloon Technology has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 5.6%.

See our latest analysis for Puloon Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for Puloon Technology's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Puloon Technology, check out these free graphs here.

What Can We Tell From Puloon Technology's ROCE Trend?

Puloon Technology has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 0.5% on its capital. In addition to that, Puloon Technology is employing 22% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On Puloon Technology's ROCE

In summary, it's great to see that Puloon Technology has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 146% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Puloon Technology can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Puloon Technology, we've discovered 2 warning signs that you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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