STX Green Logis (KRX:465770) Hasn't Managed To Accelerate Its Returns

There are a few key trends to look for if we want to identify the next multi-bagger. 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.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for STX Green Logis, this is the formula:

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

0.11 = ₩5.5b ÷ (₩74b - ₩24b) (Based on the trailing twelve months to December 2023).

So, STX Green Logis has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 6.5% generated by the Shipping industry.

View our latest analysis for STX Green Logis

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 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.

What Does the ROCE Trend For STX Green Logis Tell Us?

Over the past , STX Green Logis' ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if STX Green Logis doesn't end up being a multi-bagger in a few years time.

What We Can Learn From STX Green Logis' ROCE

In summary, STX Green Logis isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors appear hesitant that the trends will pick up because the stock has fallen 55% in the last year. Therefore based on the analysis done in this article, we don't think STX Green Logis has the makings of a multi-bagger.

STX Green Logis does have some risks, we noticed 5 warning signs (and 3 which don't sit too well with us) 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.