It's hard to not get excited about Meta Bright Group Berhad's (KLSE:MBRIGHT) recent performance. The company's stock price has fallen 26% in the past three months. However, the company's fundamentals appear to be fairly decent, and its long-term financial position is generally in line with future market price movements. In particular, I would like to pay attention to Meta Bright Group Berhad's ROE today.
ROE or return on equity is a useful tool for evaluating how effectively a company can generate returns on the investment it receives from its shareholders. In other words, this reveals that the company has been successful in turning shareholder investments into profits.
Check out our latest analysis for Meta Bright Group Berhad.
How is ROE calculated?
of ROE calculation formula teeth:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, Meta Bright Group Berhad's ROE is:
3.4% = RM8.1m ÷ RM242m (Based on trailing 12 months to September 2023).
“Return” is the profit over the past 12 months. Another way to think of it is that for every RM1 worth of shares, the company allowed him to earn a profit of RM0.03.
Why is ROE important for profit growth?
So far, we have learned that ROE is a measure of a company's profitability. We are then able to evaluate a company's future ability to generate profits based on how much of its profits it chooses to reinvest or “retain”. Generally speaking, other things being equal, companies with high return on equity and profit retention will have higher growth rates than companies without these attributes.
A side-by-side comparison of Meta Bright Group Berhad's earnings growth and ROE of 3.4%.
It is clear that Meta Bright Group Berhad's ROE is quite low. Even compared to the industry average ROE of 4.6%, the company's ROE is quite pathetic. However, we were pleasantly surprised to see that Meta Bright Group Berhad grew its net profit by a strong 31% over the past five years. We believe that other factors may be at play here. Maintaining high profits and efficient management, etc.
We then compare the industry net income growth rates and find that the growth figures reported by Meta Bright Group Berhad are very good compared to the industry average which is -1.8% over the past few years .
Earnings growth is an important metric to consider when evaluating a stock. It's important for investors to know whether the market is pricing in a company's expected earnings growth (or decline). That way, you'll know if the stock is headed for clear blue waters or if a swamp awaits. If you're wondering about Meta Bright Group Berhad's's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Is Meta Bright Group Berhad effectively utilizing its internal reserves?
Meta Bright Group Berhad currently does not pay a dividend. This essentially means that you are reinvesting all of your profits back into the business. This definitely contributes to the high profit growth rate discussed above.
conclusion
Overall, we feel that Meta Bright Group Berhad has some positive attributes. Despite the low ROE, the company was able to achieve strong earnings growth due to its high reinvestment rate. We don't want to completely fire the company, but we do try to see how risky the business is in order to make more informed decisions about the company. Our risks dashboard displays the 4 risks we have identified for Meta Bright Group Berhad.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, 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.
