Nasdaq
華爾街日報Returns On Capital At LS materials.Ltd (KOSDAQ:417200) Paint A Concerning Picture
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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Although, when we looked at LS materials.Ltd (KOSDAQ:417200), it didn't seem to tick all of these boxes.
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 LS materials.Ltd is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0029 = ₩693m ÷ (₩278b - ₩36b) (Based on the trailing twelve months to September 2025).
Therefore, LS materials.Ltd has an ROCE of 0.3%. Ultimately, that's a low return and it under-performs the Electrical industry average of 9.7%.
Check out our latest analysis for LS materials.Ltd
Historical performance is a great place to start when researching a stock so above you can see the gauge for LS materials.Ltd's ROCE against it's prior returns. If you're interested in investigating LS materials.Ltd's past further, check out this free graph covering LS materials.Ltd's past earnings, revenue and cash flow.
How Are Returns Trending?
When we looked at the ROCE trend at LS materials.Ltd, we didn't gain much confidence. To be more specific, ROCE has fallen from 11% over the last three years. However it looks like LS materials.Ltd might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.
On a related note, LS materials.Ltd has decreased its current liabilities to 13% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.
What We Can Learn From LS materials.Ltd's ROCE
To conclude, we've found that LS materials.Ltd is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 3.4% over the last year, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
On a final note, we found 4 warning signs for LS materials.Ltd (1 is a bit unpleasant) you should be aware of.
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.
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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.