Here's What To Make Of Hyundai Glovis' (KRX:086280) Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Hyundai Glovis (KRX:086280), it didn't seem to tick all of these boxes.

What is 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. Analysts use this formula to calculate it for Hyundai Glovis:

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

0.097 = ₩710b ÷ (₩10t - ₩3.1t) (Based on the trailing twelve months to September 2020).

Thus, Hyundai Glovis has an ROCE of 9.7%. On its own that's a low return, but compared to the average of 5.0% generated by the Logistics industry, it's much better.

Check out our latest analysis for Hyundai Glovis

In the above chart we have measured Hyundai Glovis' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

In terms of Hyundai Glovis' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 9.7% from 14% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Hyundai Glovis' ROCE

Bringing it all together, while we're somewhat encouraged by Hyundai Glovis' reinvestment in its own business, we're aware that returns are shrinking. And investors may be recognizing these trends since the stock has only returned a total of 19% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Hyundai Glovis could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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