Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (BUSE:MTELEKOM) Is Doing The Right Things To Multiply Its Share Price

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (BUSE:MTELEKOM) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság is:

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

0.12 = Ft136b ÷ (Ft1.5t - Ft302b) (Based on the trailing twelve months to September 2023).

Thus, Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Telecom industry average of 8.7% it's much better.

View our latest analysis for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság

In the above chart we have measured Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság.

The Trend Of ROCE

Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 12%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 35%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság is reaping the rewards from prior investments and is growing its capital base. And with a respectable 95% 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. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 2 warning signs for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság you'll probably want to know about.

While Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.