Why the 23% Return on Capital at Hellenic Telecommunications Organization (ATH: HTO) Should Hold Your Attention

To find multi-bagger stock, what are the underlying trends we need to look for in a business? First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Simply put, these types of businesses are dialing machines, which means they continually reinvest their profits at ever higher rates of return. And in light of this, the trends that we are observing at Hellenic Telecommunications Organization (ATH: HTO) looks very promising, so let’s take a look.

What is Return on Employee Capital (ROCE)?

If you’ve never worked with ROCE before, it measures the “return” (profit before tax) that a business generates on capital employed in its business. The formula for this calculation on the Hellenic organization of telecommunications is as follows:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.23 = € 813m ÷ (€ 5.5bn – € 2.1bn) (Based on the last twelve months up to September 2021).

So, Hellenic Telecommunications Organization has a ROCE of 23%. In absolute terms, this is a great return and it’s even better than the telecom industry average of 8.9%.

Check out our latest review for Hellenic Telecommunications Organization

ATSE: HTO Return on Capital Employee December 19, 2021

In the graph above, we measured Hellenic Telecommunications Organization’s past ROCE against its past performance, but arguably the future is more important. If you are interested, you can view analyst forecasts in our free analyst forecast report for the company.

The ROCE trend

We are quite satisfied with the evolution of ROCE at Hellenic Telecommunications Organization. We have found that returns on capital employed over the past five years have increased by 184%. The company now earns € 0.2 per dollar of capital employed. When it comes to capital employed, the Hellenic Telecommunications Organization appears to be doing more with less, as the company uses 34% less capital to run its operations. The Hellenic Telecom Organization may be selling some assets, so it’s worth checking out if the company has any future investment plans to further increase returns.

The key to take away

In summary, it’s great to see that the Hellenic Telecommunications Organization has managed to turn the tide and achieve higher returns on lower amounts of capital. And as the stock has performed exceptionally well over the past five years, these trends are being taken into account by investors. Therefore, we believe it would be worth checking out whether these trends will continue.

If you want to know more about the risks facing the Hellenic Telecommunications Organization, we have found out 2 warning signs that you need to be aware of.

If you want to look for other stocks that have generated high returns, check out this free list of stocks with strong balance sheets that also generate high returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.