Why The 22% Return On Capital At Hellenic Telecommunications Organization (ATH:HTO) Should Have Your Attention

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at Hellenic Telecommunications Organization's (ATH:HTO) look very promising so lets take a look.

Return On Capital Employed (ROCE): What is it?

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. Analysts use this formula to calculate it for Hellenic Telecommunications Organization:

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

0.22 = €709m ÷ (€5.3b - €2.0b) (Based on the trailing twelve months to March 2022).

Therefore, Hellenic Telecommunications Organization has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Telecom industry average of 11%.

Check out our latest analysis for Hellenic Telecommunications Organization

Above you can see how the current ROCE for Hellenic Telecommunications Organization 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 Hellenic Telecommunications Organization.

So How Is Hellenic Telecommunications Organization's ROCE Trending?

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 140%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Hellenic Telecommunications Organization appears to been achieving more with less, since the business is using 26% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Bottom Line On Hellenic Telecommunications Organization's ROCE

In summary, it's great to see that Hellenic Telecommunications Organization has been able to turn things around and earn higher returns on lower amounts of capital. And with a respectable 89% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Hellenic Telecommunications Organization, we've discovered 1 warning sign that you should be aware of.

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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.