Emirates Telecommunications Group Company PJSC (ADX:EAND) Has Some Way To Go To Become 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. 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. So, when we ran our eye over Emirates Telecommunications Group Company PJSC's (ADX:EAND) trend of ROCE, we liked what we saw.

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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. The formula for this calculation on Emirates Telecommunications Group Company PJSC is:

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

0.19 = د.إ20b ÷ (د.إ190b - د.إ84b) (Based on the trailing twelve months to June 2025).

Therefore, Emirates Telecommunications Group Company PJSC has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Telecom industry average of 11% it's much better.

See our latest analysis for Emirates Telecommunications Group Company PJSC

In the above chart we have measured Emirates Telecommunications Group Company PJSC's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Emirates Telecommunications Group Company PJSC .

What Does the ROCE Trend For Emirates Telecommunications Group Company PJSC Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has employed 40% more capital in the last five years, and the returns on that capital have remained stable at 19%. Since 19% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On a side note, Emirates Telecommunications Group Company PJSC's current liabilities are still rather high at 44% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From Emirates Telecommunications Group Company PJSC's ROCE

The main thing to remember is that Emirates Telecommunications Group Company PJSC has proven its ability to continually reinvest at respectable rates of return. Therefore it's no surprise that shareholders have earned a respectable 41% return if they held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Emirates Telecommunications Group Company PJSC does have some risks, we noticed 3 warning signs (and 1 which is potentially serious) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.