Here's What's Concerning About DAEDUCK ELECTRONICS' (KRX:353200) Returns On Capital

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at DAEDUCK ELECTRONICS (KRX:353200) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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. The formula for this calculation on DAEDUCK ELECTRONICS is:

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

0.016 = ₩14b ÷ (₩1.1t - ₩234b) (Based on the trailing twelve months to September 2025).

Therefore, DAEDUCK ELECTRONICS has an ROCE of 1.6%. Ultimately, that's a low return and it under-performs the Electronic industry average of 6.2%.

See our latest analysis for DAEDUCK ELECTRONICS

In the above chart we have measured DAEDUCK ELECTRONICS' 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 DAEDUCK ELECTRONICS for free.

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at DAEDUCK ELECTRONICS doesn't inspire confidence. Around four years ago the returns on capital were 5.6%, but since then they've fallen to 1.6%. However it looks like DAEDUCK ELECTRONICS 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.

In Conclusion...

In summary, DAEDUCK ELECTRONICS is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Yet to long term shareholders the stock has gifted them an incredible 311% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you'd like to know about the risks facing DAEDUCK ELECTRONICS, we've discovered 1 warning sign that you should be aware of.

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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.