Returns On Capital At Assems (KOSDAQ:136410) Have Hit The Brakes

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Assems' (KOSDAQ:136410) trend of ROCE, we liked what we saw.

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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 Assems is:

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

0.13 = ₩9.2b ÷ (₩107b - ₩35b) (Based on the trailing twelve months to December 2024).

Therefore, Assems has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 7.5% it's much better.

View our latest analysis for Assems

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

What Does the ROCE Trend For Assems Tell Us?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 76% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Assems has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Assems' ROCE

In the end, Assems has proven its ability to adequately reinvest capital at good rates of return. Yet over the last three years the stock has declined 50%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

On a separate note, we've found 1 warning sign for Assems you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.