We Like These Underlying Return On Capital Trends At JOOYONTECH (KRX:044380)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in JOOYONTECH's (KRX:044380) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for JOOYONTECH:

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

0.0089 = ₩403m ÷ (₩58b - ₩12b) (Based on the trailing twelve months to December 2020).

Thus, JOOYONTECH has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Tech industry average of 11%.

See our latest analysis for JOOYONTECH

Historical performance is a great place to start when researching a stock so above you can see the gauge for JOOYONTECH's ROCE against it's prior returns. If you're interested in investigating JOOYONTECH's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is JOOYONTECH's ROCE Trending?

The fact that JOOYONTECH is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 0.9% on its capital. And unsurprisingly, like most companies trying to break into the black, JOOYONTECH is utilizing 107% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Key Takeaway

Overall, JOOYONTECH gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Given the stock has declined 41% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing, we've spotted 2 warning signs facing JOOYONTECH that you might find interesting.

While JOOYONTECH may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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