Samaiden Group Berhad's (KLSE:SAMAIDEN) share price has increased by 9.2% over the past three months. Usually the market pays for a company's long-term financial health, so we decided to examine a company's fundamentals to see if they might be influencing the market. Did. Specifically, we decided to examine Samaiden Group Berhad's ROE in this article.
Return on equity or ROE tests how effectively a company is growing its value and managing investors' money. In other words, this reveals that the company has been successful in turning shareholder investments into profits.
Check out our latest analysis for Samaiden Group Berhad.
How do I calculate return on equity?
Return on equity can be calculated using the following formula:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, Samaiden Group Berhad's ROE is:
9.3% = RM11m ÷ RM113m (Based on trailing 12 months to September 2023).
“Revenue” is the income a company has earned over the past year. One way he conceptualizes this is that for every RM1 of shareholders' equity, the company made a profit of MYR0.09.
What is the relationship between ROE and profit growth rate?
So far, we have learned that ROE is a measure of a company's profitability. Depending on how much of these profits a company reinvests or “retains”, and how effectively it does so, we are then able to assess a company's earnings growth potential. Assuming everything else remains constant, the higher the ROE and profit retention, the higher the company's growth rate compared to companies that don't necessarily have these characteristics.
Samaiden Group Berhad's earnings growth and ROE 9.3%
At first glance, Samaiden Group Berhad's ROE doesn't look very attractive. However, upon closer inspection, we find that the company's ROE is higher than the industry average of 7.1%, which is hard to miss. As a result, we believe this laid the foundation for the decent growth of 13% that Samaiden Group Berhad has seen over the past five years. Note that the company's ROE is moderately low. It's just that the industry's ROE is low. Therefore, the increase in revenue could also be the result of other factors. For example, the industry as a whole may be experiencing a period of high growth, or the company's dividend payout ratio may be low.
As a next step, we compared Samaiden Group Berhad's net income growth with its industry. And we're happy to see that the company's growth is higher than the industry average of his 2.5%.
The foundations that give a company value have a lot to do with its revenue growth. Investors should check whether expected growth or decline in earnings has been factored in in any case. This will help you determine whether the stock's future is bright or bleak. One good indicator of expected earnings growth is the P/E ratio, which determines the price the market is willing to pay for a stock based on its earnings outlook. So you may want to check whether Samaiden Group Berhad is trading on a higher or lower P/E ratio, relative to its industry.
Does Samaiden Group Berhad reinvest its profits efficiently?
In Samaiden Group Berhad's case, its considerable earnings growth can probably be explained by its low three-year median payout ratio of 19% (or retention rate of 81%). This suggests that the company is investing most of its profits into profit growth. work.
Based on our latest analyst data, the company's future payout ratio over the next three years is expected to be around 19%. Still, some forecasts predict that Samamiden Group Berhad's future ROE will rise to 18%, although Samamiden Group Berhad's dividend payout ratio is not expected to change much.
conclusion
Overall, we are very satisfied with Samaiden Group Berhad's performance. Specifically, we like that the company is reinvesting high profits at a moderate rate of return, increasing profits. Having said that, a look at current analyst forecasts shows that the company's earnings are expected to gain momentum. Learn more about the company's future revenue growth forecasts here. free Create a report on analyst forecasts to learn more about the company.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
