What We Make Of Empresa Nacional de Telecomunicaciones' (SNSE:ENTEL) Returns On Capital

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. 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. With that in mind, we've noticed some promising trends at Empresa Nacional de Telecomunicaciones (SNSE:ENTEL) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Empresa Nacional de Telecomunicaciones, this is the formula:

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

0.032 = CL$138b ÷ (CL$5.1t - CL$769b) (Based on the trailing twelve months to September 2020).

Therefore, Empresa Nacional de Telecomunicaciones has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Wireless Telecom industry average of 9.7%.

View our latest analysis for Empresa Nacional de Telecomunicaciones

Above you can see how the current ROCE for Empresa Nacional de Telecomunicaciones 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 report for Empresa Nacional de Telecomunicaciones.

What Does the ROCE Trend For Empresa Nacional de Telecomunicaciones Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 3.2%. The amount of capital employed has increased too, by 61%. So we're very much inspired by what we're seeing at Empresa Nacional de Telecomunicaciones thanks to its ability to profitably reinvest capital.

What We Can Learn From Empresa Nacional de Telecomunicaciones' ROCE

All in all, it's terrific to see that Empresa Nacional de Telecomunicaciones is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 23% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Empresa Nacional de Telecomunicaciones does have some risks, we noticed 3 warning signs (and 1 which makes us a bit uncomfortable) 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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