Returns On Capital At Samsung Electro-Mechanics (KRX:009150) Have Hit The Brakes

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Although, when we looked at Samsung Electro-Mechanics (KRX:009150), it didn't seem to tick all of these boxes.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Samsung Electro-Mechanics:

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

0.078 = ₩754b ÷ (₩13t - ₩3.5t) (Based on the trailing twelve months to June 2025).

So, Samsung Electro-Mechanics has an ROCE of 7.8%. In absolute terms, that's a low return, but it's much better than the Electronic industry average of 6.4%.

Check out our latest analysis for Samsung Electro-Mechanics

Above you can see how the current ROCE for Samsung Electro-Mechanics compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Samsung Electro-Mechanics for free.

What Can We Tell From Samsung Electro-Mechanics' ROCE Trend?

The returns on capital haven't changed much for Samsung Electro-Mechanics in recent years. The company has employed 41% more capital in the last five years, and the returns on that capital have remained stable at 7.8%. 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.

The Bottom Line

Long story short, while Samsung Electro-Mechanics has been reinvesting its capital, the returns that it's generating haven't increased. And with the stock having returned a mere 34% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

While Samsung Electro-Mechanics doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for A009150 on our platform.

While Samsung Electro-Mechanics 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.