Why The 23% Return On Capital At Hellenic Telecommunications Organization (ATH:HTO) Should Have Your Attention

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. 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.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its 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)

0.23 = €813m ÷ (€5.5b - €2.1b) (Based on the trailing twelve months to September 2021).

So, Hellenic Telecommunications Organization has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Telecom industry average of 8.9%.

Check out 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.

The Trend Of ROCE

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 184%. The company is now earning €0.2 per dollar of capital employed. In regards to capital employed, Hellenic Telecommunications Organization appears to been achieving more with less, since the business is using 34% less capital to run its operation. Hellenic Telecommunications Organization may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Key Takeaway

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 the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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 2 warning signs that you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.