Catis (KOSDAQ:140430) Might Have The Makings Of A Multi-Bagger
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Catis (KOSDAQ:140430) and its trend of ROCE, we really liked what we saw.
What Is 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. Analysts use this formula to calculate it for Catis:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.038 = ₩1.4b ÷ (₩53b - ₩16b) (Based on the trailing twelve months to September 2025).
So, Catis has an ROCE of 3.8%. Ultimately, that's a low return and it under-performs the Software industry average of 6.2%.
See our latest analysis for Catis
Historical performance is a great place to start when researching a stock so above you can see the gauge for Catis' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Catis.
What The Trend Of ROCE Can Tell Us
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 3.8%. Basically the business is earning more per dollar of capital invested and in addition to that, 162% more capital is being employed now too. So we're very much inspired by what we're seeing at Catis thanks to its ability to profitably reinvest capital.
Our Take On Catis' ROCE
All in all, it's terrific to see that Catis is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 22% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.
Catis does come with some risks though, we found 4 warning signs in our investment analysis, and 3 of those are potentially serious...
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.