Moscow City Telephone Network (MCX:MGTS) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Moscow City Telephone Network (MCX:MGTS) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Moscow City Telephone Network, this is the formula:

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

0.095 = ₽9.8b ÷ (₽124b - ₽20b) (Based on the trailing twelve months to December 2020).

Therefore, Moscow City Telephone Network has an ROCE of 9.5%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.4%.

Check out our latest analysis for Moscow City Telephone Network

Historical performance is a great place to start when researching a stock so above you can see the gauge for Moscow City Telephone Network's ROCE against it's prior returns. If you're interested in investigating Moscow City Telephone Network's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Moscow City Telephone Network's ROCE Trending?

Over the past five years, Moscow City Telephone Network's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Moscow City Telephone Network doesn't end up being a multi-bagger in a few years time.

In Conclusion...

In a nutshell, Moscow City Telephone Network has been trudging along with the same returns from the same amount of capital over the last five years. Yet to long term shareholders the stock has gifted them an incredible 319% return in the last five years, so the market appears to be rosy about its future. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you want to continue researching Moscow City Telephone Network, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.
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