Is Atec T& (KOSDAQ:224110) Likely To Turn Things Around?

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. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Atec T& (KOSDAQ:224110), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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. To calculate this metric for Atec T&, this is the formula:

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

0.033 = ₩2.9b ÷ (₩116b - ₩27b) (Based on the trailing twelve months to September 2020).

Thus, Atec T& has an ROCE of 3.3%. Ultimately, that's a low return and it under-performs the Electronic industry average of 5.6%.

See our latest analysis for Atec T&

Historical performance is a great place to start when researching a stock so above you can see the gauge for Atec T&'s ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Atec T&, check out these free graphs here.

What Does the ROCE Trend For Atec T& Tell Us?

The returns on capital haven't changed much for Atec T& in recent years. Over the past three years, ROCE has remained relatively flat at around 3.3% and the business has deployed 44% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

In Conclusion...

In conclusion, Atec T& has been investing more capital into the business, but returns on that capital haven't increased. Yet to long term shareholders the stock has gifted them an incredible 159% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Atec T&, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Atec T& 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. 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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