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    Hanwha Galleria (KRX:452260) Could Be At Risk Of Shrinking As A Company

    Simply Wall St·12/17/2025 21:22:25
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    To avoid investing in a business that's in decline, there's a few financial metrics that can provide early indications of aging. A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. On that note, looking into Hanwha Galleria (KRX:452260), we weren't too upbeat about how things were going.

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

    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 Hanwha Galleria is:

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

    0.0019 = ₩2.5b ÷ (₩1.9t - ₩633b) (Based on the trailing twelve months to September 2025).

    Thus, Hanwha Galleria has an ROCE of 0.2%. In absolute terms, that's a low return and it also under-performs the Multiline Retail industry average of 4.4%.

    View our latest analysis for Hanwha Galleria

    roce
    KOSE:A452260 Return on Capital Employed December 17th 2025

    While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Hanwha Galleria has performed in the past in other metrics, you can view this free graph of Hanwha Galleria's past earnings, revenue and cash flow.

    How Are Returns Trending?

    There is reason to be cautious about Hanwha Galleria, given the returns are trending downwards. Unfortunately the returns on capital have diminished from the 1.1% that they were earning five years ago. On top of that, it's worth noting that the amount of capital employed within the business has remained relatively steady. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. If these trends continue, we wouldn't expect Hanwha Galleria to turn into a multi-bagger.

    On a side note, Hanwha Galleria has done well to pay down its current liabilities to 33% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. 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.

    The Key Takeaway

    In summary, it's unfortunate that Hanwha Galleria is generating lower returns from the same amount of capital. Yet despite these concerning fundamentals, the stock has performed strongly with a 26% return over the last year, so investors appear very optimistic. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

    One final note, you should learn about the 3 warning signs we've spotted with Hanwha Galleria (including 2 which are significant) .

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