What financial metrics can indicate to us that a company is maturing or even in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. And from a first read, things don't look too good at Singapore Telecommunications (SGX:Z74), so let's see why.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Advertisement

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. To calculate this metric for Singapore Telecommunications, this is the formula:

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

0.037 = S$1.3b ÷ (S$45b - S$9.0b) (Based on the trailing twelve months to December 2024).

So, Singapore Telecommunications has an ROCE of 3.7%. Ultimately, that's a low return and it under-performs the Telecom industry average of 11%.

View our latest analysis for Singapore Telecommunications

SGX:Z74 Return on Capital Employed March 19th 2025

Above you can see how the current ROCE for Singapore Telecommunications 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 Singapore Telecommunications for free.

How Are Returns Trending?

In terms of Singapore Telecommunications' historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 5.7% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Singapore Telecommunications to turn into a multi-bagger.

Our Take On Singapore Telecommunications' ROCE

In summary, it's unfortunate that Singapore Telecommunications is generating lower returns from the same amount of capital. But investors must be expecting an improvement of sorts because over the last five yearsthe stock has delivered a respectable 70% return. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with Singapore Telecommunications (including 1 which can't be ignored) .

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.