Moorim SP (KOSDAQ:001810) Might Have The Makings Of A Multi-Bagger

Simply Wall St · 10/14 22:14

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Moorim SP (KOSDAQ:001810) and its trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Moorim SP:

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

0.0037 = ₩916m ÷ (₩319b - ₩73b) (Based on the trailing twelve months to June 2024).

So, Moorim SP has an ROCE of 0.4%. Ultimately, that's a low return and it under-performs the Forestry industry average of 5.4%.

View our latest analysis for Moorim SP

roce
KOSDAQ:A001810 Return on Capital Employed October 14th 2024

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 Moorim SP has performed in the past in other metrics, you can view this free graph of Moorim SP's past earnings, revenue and cash flow.

So How Is Moorim SP's ROCE Trending?

Moorim SP has broken into the black (profitability) and we're sure it's a sight for sore eyes. While the business was unprofitable in the past, it's now turned things around and is earning 0.4% on its capital. While returns have increased, the amount of capital employed by Moorim SP has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Our Take On Moorim SP's ROCE

To sum it up, Moorim SP is collecting higher returns from the same amount of capital, and that's impressive. Astute investors may have an opportunity here because the stock has declined 13% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you want to know some of the risks facing Moorim SP we've found 3 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing here.

While Moorim SP 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.