Dong-Ah Geological Engineering (KRX:028100) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, we've noticed some promising trends at Dong-Ah Geological Engineering (KRX:028100) so let's look a bit deeper.

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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. To calculate this metric for Dong-Ah Geological Engineering, this is the formula:

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

0.072 = ₩16b ÷ (₩439b - ₩211b) (Based on the trailing twelve months to September 2025).

Therefore, Dong-Ah Geological Engineering has an ROCE of 7.2%. In absolute terms, that's a low return, but it's much better than the Construction industry average of 5.9%.

View our latest analysis for Dong-Ah Geological Engineering

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

What Can We Tell From Dong-Ah Geological Engineering's ROCE Trend?

Dong-Ah Geological Engineering is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 33% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 48% of the business, which is more than it was five years ago. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

In Conclusion...

To sum it up, Dong-Ah Geological Engineering is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has only returned 27% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing, we've spotted 1 warning sign facing Dong-Ah Geological Engineering that you might find interesting.

While Dong-Ah Geological Engineering 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.

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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.