Returns At Emirates Telecommunications Group Company PJSC (ADX:EAND) Appear To Be Weighed Down

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, the ROCE of Emirates Telecommunications Group Company PJSC (ADX:EAND) looks decent, right now, so lets see what the trend of returns can tell us.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Understanding 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. To calculate this metric for Emirates Telecommunications Group Company PJSC, this is the formula:

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

0.17 = د.إ20b ÷ (د.إ192b - د.إ79b) (Based on the trailing twelve months to March 2025).

Therefore, Emirates Telecommunications Group Company PJSC has an ROCE of 17%. 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

Above you can see how the current ROCE for Emirates Telecommunications Group Company PJSC compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Emirates Telecommunications Group Company PJSC .

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 17% for the last five years, and the capital employed within the business has risen 40% in that time. Since 17% 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 separate but related note, it's important to know that Emirates Telecommunications Group Company PJSC has a current liabilities to total assets ratio of 41%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line On Emirates Telecommunications Group Company PJSC's ROCE

In the end, Emirates Telecommunications Group Company PJSC has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 34% over the last five years for shareholders who have owned the stock in this period. So to determine if Emirates Telecommunications Group Company PJSC is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

Emirates Telecommunications Group Company PJSC does have some risks, we noticed 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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.