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SELVAS Healthcare (KOSDAQ:208370) Might Be Having Difficulty Using Its Capital Effectively

Simply Wall St · 1d ago

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at SELVAS Healthcare (KOSDAQ:208370), it didn't seem to tick all of these boxes.

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Understanding 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. The formula for this calculation on SELVAS Healthcare is:

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

0.015 = ₩964m ÷ (₩71b - ₩6.0b) (Based on the trailing twelve months to September 2025).

Thus, SELVAS Healthcare has an ROCE of 1.5%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 7.5%.

Check out our latest analysis for SELVAS Healthcare

roce
KOSDAQ:A208370 Return on Capital Employed December 8th 2025

Historical performance is a great place to start when researching a stock so above you can see the gauge for SELVAS Healthcare's ROCE against it's prior returns. If you're interested in investigating SELVAS Healthcare's past further, check out this free graph covering SELVAS Healthcare's past earnings, revenue and cash flow.

The Trend Of ROCE

When we looked at the ROCE trend at SELVAS Healthcare, we didn't gain much confidence. Around five years ago the returns on capital were 5.3%, but since then they've fallen to 1.5%. However it looks like SELVAS Healthcare might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

On a related note, SELVAS Healthcare has decreased its current liabilities to 8.4% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

In Conclusion...

To conclude, we've found that SELVAS Healthcare is reinvesting in the business, but returns have been falling. Since the stock has gained an impressive 75% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you want to continue researching SELVAS Healthcare, you might be interested to know about the 1 warning sign that our analysis has discovered.

While SELVAS Healthcare isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.