GH Advanced Materials (KOSDAQ:130500) Shareholders Will Want The ROCE Trajectory To Continue

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. So on that note, GH Advanced Materials (KOSDAQ:130500) looks quite promising in regards to its trends of return on capital.

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Understanding Return On Capital Employed (ROCE)

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 GH Advanced Materials, this is the formula:

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

0.055 = ₩7.0b ÷ (₩196b - ₩69b) (Based on the trailing twelve months to September 2025).

Therefore, GH Advanced Materials has an ROCE of 5.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.5%.

Check out our latest analysis for GH Advanced Materials

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

What Can We Tell From GH Advanced Materials' ROCE Trend?

The fact that GH Advanced Materials 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 5.5% on its capital. Not only that, but the company is utilizing 137% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

What We Can Learn From GH Advanced Materials' ROCE

Long story short, we're delighted to see that GH Advanced Materials' reinvestment activities have paid off and the company is now profitable. Astute investors may have an opportunity here because the stock has declined 62% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing: We've identified 3 warning signs with GH Advanced Materials (at least 1 which is a bit unpleasant) , and understanding these would certainly be useful.

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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.