Why We Like The Returns At Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság (BUSE:MTELEKOM)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság's (BUSE:MTELEKOM) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

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. 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)

0.21 = Ft255b ÷ (Ft1.4t - Ft229b) (Based on the trailing twelve months to June 2025).

Thus, Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar 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're interested, you can view the analysts predictions in our free analyst report for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság .

The Trend Of ROCE

Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 21%. Basically the business is earning more per dollar of capital invested and in addition to that, 27% more capital is being employed now too. So we're very much inspired by what we're seeing at Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 16%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

What We Can Learn From Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság does have some risks though, and we've spotted 1 warning sign for Magyar Telekom Távközlési Nyilvánosan Müködö Részvénytársaság that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.