Returns On Capital Are Showing Encouraging Signs At CXI Healthcare Technology Group (KOSDAQ:900120)

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. 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. Speaking of which, we noticed some great changes in CXI Healthcare Technology Group’s (KOSDAQ:900120) returns on capital, so let’s have a look.

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What Is Return On Capital Employed (ROCE)?

If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for CXI Healthcare Technology Group:

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

0.02 = ₩9.7b ÷ (₩494b – ₩2.0b) (Based on the trailing twelve months to June 2025).

So, CXI Healthcare Technology Group has an ROCE of 2.0%. In absolute terms, that’s a low return and it also under-performs the Personal Products industry average of 7.7%.

View our latest analysis for CXI Healthcare Technology Group

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of CXI Healthcare Technology Group.

What The Trend Of ROCE Can Tell Us

CXI Healthcare Technology Group has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it’s earning 2.0% which is a sight for sore eyes. In addition to that, CXI Healthcare Technology Group is employing 39% more capital than previously which is expected of a company that’s trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion…

In summary, it’s great to see that CXI Healthcare Technology Group has managed to break into profitability and is continuing to reinvest in its business. However the stock is down a substantial 82% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

One more thing, we’ve spotted 3 warning signs facing CXI Healthcare Technology Group that you might find interesting.

While CXI Healthcare Technology Group may not currently earn the highest returns, we’ve compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.