The Returns On Capital At Mirai Semiconductors (KOSDAQ:254490) Don't Inspire Confidence

If you're looking for a multi-bagger, there's a few things to keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Mirai Semiconductors (KOSDAQ:254490) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Mirai Semiconductors is:

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

0.11 = ₩11b ÷ (₩158b - ₩57b) (Based on the trailing twelve months to September 2024).

Therefore, Mirai Semiconductors has an ROCE of 11%. 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 Mirai Semiconductors

Above you can see how the current ROCE for Mirai Semiconductors compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Mirai Semiconductors .

What The Trend Of ROCE Can Tell Us

In terms of Mirai Semiconductors' historical ROCE movements, the trend isn't fantastic. Around three years ago the returns on capital were 36%, but since then they've fallen to 11%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

While returns have fallen for Mirai Semiconductors in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These growth trends haven't led to growth returns though, since the stock has fallen 47% over the last year. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

If you're still interested in Mirai Semiconductors it's worth checking out our FREE intrinsic value approximation for A254490 to see if it's trading at an attractive price in other respects.

While Mirai Semiconductors 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.