Returns At Hyundai Glovis (KRX:086280) Are On The Way Up

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Hyundai Glovis (KRX:086280) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Hyundai Glovis is:

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

0.15 = ₩1.5t ÷ (₩15t - ₩5.3t) (Based on the trailing twelve months to March 2024).

So, Hyundai Glovis has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Logistics industry average of 7.0% it's much better.

Check out our latest analysis for Hyundai Glovis

Above you can see how the current ROCE for Hyundai Glovis 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 Hyundai Glovis .

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Hyundai Glovis. The data shows that returns on capital have increased substantially over the last five years to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 68%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Hyundai Glovis' ROCE

To sum it up, Hyundai Glovis has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 59% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Hyundai Glovis does have some risks though, and we've spotted 1 warning sign for Hyundai Glovis that you might be interested in.

While Hyundai Glovis 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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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.