Returns On Capital At Emirates Telecommunications Group Company PJSC (ADX:ETISALAT) Have Stalled

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Emirates Telecommunications Group Company PJSC (ADX:ETISALAT), we don't think it's current trends fit the mold of a multi-bagger.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the 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)

0.18 = د.إ15b ÷ (د.إ125b - د.إ42b) (Based on the trailing twelve months to June 2021).

Therefore, Emirates Telecommunications Group Company PJSC has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Telecom industry.

Check out 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'd like to see what analysts are forecasting going forward, you should check out our free report for Emirates Telecommunications Group Company PJSC.

How Are Returns Trending?

Things have been pretty stable at Emirates Telecommunications Group Company PJSC, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if Emirates Telecommunications Group Company PJSC doesn't end up being a multi-bagger in a few years time. On top of that you'll notice that Emirates Telecommunications Group Company PJSC has been paying out a large portion (88%) of earnings in the form of dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

The Key Takeaway

We can conclude that in regards to Emirates Telecommunications Group Company PJSC's returns on capital employed and the trends, there isn't much change to report on. Although the market must be expecting these trends to improve because the stock has gained 59% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a separate note, we've found 1 warning sign for Emirates Telecommunications Group Company PJSC you'll probably want to know about.

While Emirates Telecommunications Group Company PJSC 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.
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