Hellenic Telecommunications Organization (ATH:HTO) Is Investing Its Capital With Increasing Efficiency

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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, the ROCE of Hellenic Telecommunications Organization (ATH:HTO) looks great, so lets see what the trend can tell us.

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. The formula for this calculation on Hellenic Telecommunications Organization is:

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

0.20 = €630m ÷ (€5.0b - €1.8b) (Based on the trailing twelve months to December 2022).

Thus, Hellenic Telecommunications Organization has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Telecom industry average of 9.4%.

View our latest analysis for Hellenic Telecommunications Organization

In the above chart we have measured Hellenic Telecommunications Organization'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 report on analyst forecasts for the company.

What Does the ROCE Trend For Hellenic Telecommunications Organization Tell Us?

We're pretty happy with how the ROCE has been trending at Hellenic Telecommunications Organization. We found that the returns on capital employed over the last five years have risen by 83%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Interestingly, the business may be becoming more efficient because it's applying 27% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

What We Can Learn From Hellenic Telecommunications Organization's ROCE

In the end, Hellenic Telecommunications Organization has proven it's capital allocation skills are good with those higher returns from less amount of capital. Since the stock has returned a solid 42% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if Hellenic Telecommunications Organization can keep these trends up, it could have a bright future ahead.

If you want to continue researching Hellenic Telecommunications Organization, you might be interested to know about the 1 warning sign that our analysis has discovered.

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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.