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Investors Will Want Hanil Iron & Steel's (KRX:002220) Growth In ROCE To Persist

Simply Wall St · 2d ago

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Hanil Iron & Steel's (KRX:002220) returns on capital, so let's have a look.

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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 Hanil Iron & Steel is:

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

0.015 = ₩3.0b ÷ (₩345b - ₩142b) (Based on the trailing twelve months to September 2025).

Thus, Hanil Iron & Steel has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 4.4%.

See our latest analysis for Hanil Iron & Steel

roce
KOSE:A002220 Return on Capital Employed December 10th 2025

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

What Can We Tell From Hanil Iron & Steel's ROCE Trend?

Shareholders will be relieved that Hanil Iron & Steel has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 1.5%, which is always encouraging. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 41% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

In Conclusion...

As discussed above, Hanil Iron & Steel appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Hanil Iron & Steel we've found 2 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.