We Like These Underlying Return On Capital Trends At Ymc (KOSDAQ:155650)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Ymc's (KOSDAQ:155650) returns on capital, so let's have a look.

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 Ymc:

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

0.054 = ₩6.9b ÷ (₩172b - ₩44b) (Based on the trailing twelve months to September 2024).

So, Ymc has an ROCE of 5.4%. On its own, that's a low figure but it's around the 6.7% average generated by the Electronic industry.

Check out our latest analysis for Ymc

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

So How Is Ymc's ROCE Trending?

The fact that Ymc is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 5.4% which is a sight for sore eyes. Not only that, but the company is utilizing 48% more capital than before, but that's to be expected from a company 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 Key Takeaway

Overall, Ymc gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And since the stock has fallen 38% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One final note, you should learn about the 4 warning signs we've spotted with Ymc (including 1 which doesn't sit too well with us) .

While Ymc 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.