Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (BUSE:MTELEKOM) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, we've noticed some promising trends at Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (BUSE:MTELEKOM) so let's look a bit deeper.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság:

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

0.16 = Ft193b ÷ (Ft1.5t - Ft282b) (Based on the trailing twelve months to June 2024).

Thus, Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 10.0% generated by the Telecom industry.

Check out our latest analysis for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság

Above you can see how the current ROCE for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság for free.

What Can We Tell From Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság's ROCE Trend?

The trends we've noticed at Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 16%. 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 30%. 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 On Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság's ROCE

In summary, it's great to see that Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 210% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság that we think you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.