Hellenic Telecommunications Organization S.A.'s (ATH:HTO) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Most readers would already be aware that Hellenic Telecommunications Organization's (ATH:HTO) stock increased significantly by 6.3% over the past month. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. Particularly, we will be paying attention to Hellenic Telecommunications Organization's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Hellenic Telecommunications Organization is:

24% = €448m ÷ €1.8b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. One way to conceptualize this is that for each €1 of shareholders' capital it has, the company made €0.24 in profit.

View our latest analysis for Hellenic Telecommunications Organization

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Hellenic Telecommunications Organization's Earnings Growth And 24% ROE

Firstly, we acknowledge that Hellenic Telecommunications Organization has a significantly high ROE. Second, a comparison with the average ROE reported by the industry of 13% also doesn't go unnoticed by us. Probably as a result of this, Hellenic Telecommunications Organization was able to see a decent net income growth of 7.6% over the last five years.

Next, on comparing with the industry net income growth, we found that Hellenic Telecommunications Organization's reported growth was lower than the industry growth of 10% over the last few years, which is not something we like to see.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. What is HTO worth today? The intrinsic value infographic in our free research report helps visualize whether HTO is currently mispriced by the market.

Is Hellenic Telecommunications Organization Using Its Retained Earnings Effectively?

Hellenic Telecommunications Organization has a significant three-year median payout ratio of 61%, meaning that it is left with only 39% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.

Besides, Hellenic Telecommunications Organization has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 49%. As a result, Hellenic Telecommunications Organization's ROE is not expected to change by much either, which we inferred from the analyst estimate of 27% for future ROE.

Summary

Overall, we feel that Hellenic Telecommunications Organization certainly does have some positive factors to consider. Its earnings have grown respectably as we saw earlier, which was likely due to the company reinvesting its earnings at a pretty high rate of return. However, given the high ROE, we do think that the company is reinvesting a small portion of its profits. This could likely be preventing the company from growing to its full extent. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.