Yoosung T&S (KOSDAQ:024800) Will Be Hoping To Turn Its Returns On Capital Around

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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Yoosung T&S (KOSDAQ:024800) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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. The formula for this calculation on Yoosung T&S is:

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

0.0085 = ₩4.5b ÷ (₩623b - ₩87b) (Based on the trailing twelve months to March 2025).

Therefore, Yoosung T&S has an ROCE of 0.8%. Ultimately, that's a low return and it under-performs the Transportation industry average of 2.6%.

See our latest analysis for Yoosung T&S

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Yoosung T&S has performed in the past in other metrics, you can view this free graph of Yoosung T&S' past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of Yoosung T&S' historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 3.1%, but since then they've fallen to 0.8%. And considering revenue has dropped while employing more capital, we'd be cautious. This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - "less bang for their buck" per se.

On a side note, Yoosung T&S has done well to pay down its current liabilities to 14% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Key Takeaway

In summary, we're somewhat concerned by Yoosung T&S' diminishing returns on increasing amounts of capital. In spite of that, the stock has delivered a 12% return to shareholders who held over the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere.

Like most companies, Yoosung T&S does come with some risks, and we've found 2 warning signs that you should be aware of.

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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.