Returns On Capital Are Showing Encouraging Signs At Dilli Illustrate (KOSDAQ:131180)

There are a few key trends to look for if we want to identify the next 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Dilli Illustrate (KOSDAQ:131180) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

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 Dilli Illustrate is:

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

0.026 = ₩1.6b ÷ (₩73b - ₩11b) (Based on the trailing twelve months to September 2024).

Therefore, Dilli Illustrate has an ROCE of 2.6%. Ultimately, that's a low return and it under-performs the Tech industry average of 3.7%.

See our latest analysis for Dilli Illustrate

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

What Does the ROCE Trend For Dilli Illustrate Tell Us?

While the ROCE isn't as high as some other companies out there, it's great to see it's on the up. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 277% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Key Takeaway

In summary, we're delighted to see that Dilli Illustrate has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 30% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

Dilli Illustrate does have some risks though, and we've spotted 2 warning signs for Dilli Illustrate that you might be interested in.

While Dilli Illustrate 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.