The return trends for Global SM Tech (KOSDAQ:900070) look promising


What trends should we look for to identify stocks that can multiply in value over the long term? First, we want to identify growth to return on the capital employed (ROCE) and a constantly increasing value base of the capital employed. When you see this, it usually means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at that Global SM Technology (KOSDAQ:900070) and its ROCE trend, we really liked what we saw.

Understand return on capital employed (ROCE).

For those who don't know, ROCE is a measure of a company's annual pre-tax profit (its return) in relation to the capital employed in the company. The formula for this calculation for Global SM Tech is:

Return on capital employed = Earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.048 = ₩6.2b ÷ (₩154b – ₩24b) (Based on the last twelve months ended September 2023).

So, Global SM Tech has an ROCE of 4.8%. In absolute terms, this is a low return and is also below the machinery industry average of 7.0%.

Check out our latest analysis for Global SM Tech

KOSDAQ:A900070 Return on Capital Employed April 9, 2024

Even if the past is not representative of the future, it can be helpful to know how a company has performed in the past. That's why we have this chart above. If you want to look at historical returns, check these out free Charts detailing Global SM Tech's revenue and cash flow performance.

What does the ROCE trend for global SM technology tell us?

Global SM Tech recently reached profitability, so their previous investments appear to be paying off. Five years ago the company was making losses, but now it is earning 4.8%, which is a sight to behold. Additionally, Global SM Tech is deploying 22% more capital than before, which is expected from a company trying to break even. This can tell us that the company has numerous reinvestment opportunities that can generate higher returns.

The key takeaway

Long story short, we are pleased that Global SM Tech's reinvestment activities have paid off and the company is now profitable. Smart investors could have an opportunity here, as the stock is down 48% over the last five years. With this in mind, we believe the promising trends warrant further investigation into this stock.

If you want to know more about the risks Global SM Tech faces, we found out 1 warning sign what you should be aware of.

Even though Global SM Tech doesn't have the highest return, check out the following free List of companies that generate high returns on equity with solid balance sheets.

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Find out whether Global SM Tech may be overvalued or undervalued by checking out our comprehensive analysis Fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.