Return Trends At Hrvatski Telekom d.d (ZGSE:HT) Aren't Appealing

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Hrvatski Telekom d.d (ZGSE:HT), it didn't seem to tick all of these boxes.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Hrvatski Telekom d.d:

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

0.098 = €173m ÷ (€2.1b - €285m) (Based on the trailing twelve months to September 2024).

Thus, Hrvatski Telekom d.d has an ROCE of 9.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 10%.

Check out our latest analysis for Hrvatski Telekom d.d

In the above chart we have measured Hrvatski Telekom d.d'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 analyst report for Hrvatski Telekom d.d .

How Are Returns Trending?

Things have been pretty stable at Hrvatski Telekom d.d, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Hrvatski Telekom d.d doesn't end up being a multi-bagger in a few years time. That being the case, it makes sense that Hrvatski Telekom d.d has been paying out 100% of its earnings to its shareholders. Most shareholders probably know this and own the stock for its dividend.

The Key Takeaway

We can conclude that in regards to Hrvatski Telekom d.d's returns on capital employed and the trends, there isn't much change to report on. Yet to long term shareholders the stock has gifted them an incredible 106% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Hrvatski Telekom d.d does have some risks though, and we've spotted 1 warning sign for Hrvatski Telekom d.d that you might be interested in.

While Hrvatski Telekom d.d isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.