There's Been No Shortage Of Growth Recently For Inscobee's (KRX:006490) Returns On Capital
There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Inscobee (KRX:006490) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
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. The formula for this calculation on Inscobee is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.011 = ₩390m ÷ (₩77b - ₩42b) (Based on the trailing twelve months to September 2025).
Therefore, Inscobee has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Telecom industry average of 11%.
See our latest analysis for Inscobee
Historical performance is a great place to start when researching a stock so above you can see the gauge for Inscobee's ROCE against it's prior returns. If you're interested in investigating Inscobee's past further, check out this free graph covering Inscobee's past earnings, revenue and cash flow.
What Can We Tell From Inscobee's ROCE Trend?
We're delighted to see that Inscobee is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but now it's turned around, earning 1.1% which is no doubt a relief for some early shareholders. Additionally, the business is utilizing 33% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. This could potentially mean that the company is selling some of its assets.
On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 55% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.
The Bottom Line
In the end, Inscobee has proven it's capital allocation skills are good with those higher returns from less amount of capital. And since the stock has fallen 60% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
Inscobee does have some risks, we noticed 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.
While Inscobee 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.