Returns On Capital At LG (KRX:003550) Paint A Concerning Picture

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at LG (KRX:003550), it didn't seem to tick all of these boxes.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for LG, this is the formula:

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

0.036 = ₩1.1t ÷ (₩32t - ₩1.9t) (Based on the trailing twelve months to September 2025).

So, LG has an ROCE of 3.6%. Ultimately, that's a low return and it under-performs the Industrials industry average of 5.0%.

See our latest analysis for LG

Above you can see how the current ROCE for LG compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for LG .

So How Is LG's ROCE Trending?

When we looked at the ROCE trend at LG, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 3.6% from 6.7% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On LG's ROCE

In summary, LG is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors may be recognizing these trends since the stock has only returned a total of 2.7% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

LG could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for A003550 on our platform quite valuable.

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

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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.