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    Investors Will Want WemadeLtd's (KOSDAQ:112040) Growth In ROCE To Persist

    Simply Wall St·12/16/2025 23:27:07
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    Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at WemadeLtd (KOSDAQ:112040) and its trend of ROCE, we really 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. To calculate this metric for WemadeLtd, this is the formula:

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

    0.00081 = ₩885m ÷ (₩1.7t - ₩656b) (Based on the trailing twelve months to September 2025).

    So, WemadeLtd has an ROCE of 0.08%. In absolute terms, that's a low return and it also under-performs the Entertainment industry average of 6.7%.

    Check out our latest analysis for WemadeLtd

    roce
    KOSDAQ:A112040 Return on Capital Employed December 16th 2025

    In the above chart we have measured WemadeLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering WemadeLtd for free.

    So How Is WemadeLtd's ROCE Trending?

    The fact that WemadeLtd is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 0.08% on its capital. Not only that, but the company is utilizing 335% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

    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 38% of the business, which is more than it was five years ago. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

    The Bottom Line

    To the delight of most shareholders, WemadeLtd has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 60% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

    One more thing, we've spotted 2 warning signs facing WemadeLtd that you might find interesting.

    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.