Be Wary Of STX Green Logis (KRX:465770) And Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating STX Green Logis (KRX:465770), we don't think it's current trends fit the mold of a multi-bagger.

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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 STX Green Logis:

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

0.051 = ₩7.2b ÷ (₩239b - ₩99b) (Based on the trailing twelve months to December 2024).

So, STX Green Logis has an ROCE of 5.1%. Ultimately, that's a low return and it under-performs the Shipping industry average of 7.2%.

View our latest analysis for STX Green Logis

Historical performance is a great place to start when researching a stock so above you can see the gauge for STX Green Logis' ROCE against it's prior returns. If you'd like to look at how STX Green Logis has performed in the past in other metrics, you can view this free graph of STX Green Logis' past earnings, revenue and cash flow.

So How Is STX Green Logis' ROCE Trending?

Unfortunately, the trend isn't great with ROCE falling from 11% one year ago, while capital employed has grown 182%. Usually this isn't ideal, but given STX Green Logis conducted a capital raising before their most recent earnings announcement, that would've likely contributed, at least partially, to the increased capital employed figure. STX Green Logis probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

On a separate but related note, it's important to know that STX Green Logis has a current liabilities to total assets ratio of 41%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On STX Green Logis' ROCE

From the above analysis, we find it rather worrisome that returns on capital and sales for STX Green Logis have fallen, meanwhile the business is employing more capital than it was one year ago. But investors must be expecting an improvement of sorts because over the last yearthe stock has delivered a respectable 19% return. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

STX Green Logis does have some risks, we noticed 6 warning signs (and 3 which are a bit unpleasant) we think you should know about.

While STX Green Logis 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.