We Like These Underlying Return On Capital Trends At Korea Electric Power (KRX:015760)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Korea Electric Power's (KRX:015760) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Korea Electric Power, this is the formula:

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

0.075 = ₩14t ÷ (₩253t - ₩66t) (Based on the trailing twelve months to September 2025).

Thus, Korea Electric Power has an ROCE of 7.5%. On its own that's a low return, but compared to the average of 5.8% generated by the Electric Utilities industry, it's much better.

Check out our latest analysis for Korea Electric Power

Above you can see how the current ROCE for Korea Electric Power 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 Korea Electric Power .

How Are Returns Trending?

Korea Electric Power's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 720% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 26% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

The Bottom Line On Korea Electric Power's ROCE

As discussed above, Korea Electric Power appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 78% return over the last five years. In light of that, we think it's worth looking further into this stock because if Korea Electric Power can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for Korea Electric Power you'll probably want to know about.

While Korea Electric Power 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.