If you’re not sure where to start when looking for your next multi-bagger, there are a few key trends to look at: Typically, you want to focus on growth trends. return Increase in capital employed (ROCE) and expand accordingly base of capital employed. This basically means that the company has a profitable endeavor that can be continually reinvested, which is the nature of compound interest. Taking this into consideration, I found that Hyundai Mobis Co., Ltd. (KRX:012330) and its ROCE trend, we weren’t too excited about it.
What is return on capital employed (ROCE)?
For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (return) on the capital employed in its business. To calculate this metric for Hyundai MobisLtd, we can use the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.049 = ₩2.3t ÷ (₩59t – ₩12t) (Based on the trailing 12 months ending December 2023).
therefore, Hyundai MobisLtd’s ROCE is 4.9%. In absolute terms, this is a poor return, below the auto parts industry average of 9.1%.
Check out our latest analysis for Hyundai Mobis Co., Ltd.
In the chart above we’ve measured Hyundai Mobis Co. Ltd’s prior ROCE against its past performance, but the future is arguably more important – if you want you can check out forecasts from the analysts covering Hyundai Mobis Co. Ltd. free.
So, what are the trends in Hyundai MobisLtd’s ROCE?
Hyundai Mobis’s return on capital hasn’t changed much in recent years. The company has deployed over 34% of its capital over the past five years, yet its return on capital has remained stable at 4.9%. This low ROCE does not inspire confidence at this point, and given the increase in deployed capital, it’s clear that the company is not putting its money into higher-return investments.
Our take on Hyundai Mobis Co., Ltd.’s ROCE
As we have seen above, Hyundai Mobis Co., Ltd.’s return on capital is not increasing, but it is reinvesting in the business. Investors may also be aware of this trend, as the company’s stock has returned only a total of 12% to shareholders over the past five years. So if you’re looking for a multibagger, the underlying trends indicate you may have better chances elsewhere.
However, Hyundai Mobis Co., Ltd. has some risks, which we have discovered 1 warning sign for Hyundai Mobis Ltd Something you might be interested in.
Hyundai MobisLtd may not be the most profitable, but check this out. free A list of companies with healthy balance sheets and high return on equity.
Valuation is complex, but we help make it simple.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
