Asiamedic (Cat:505) stock has increased by 9.1% in the past 3 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, in this article we decided to investigate Asia Medic's ROE.
Return on equity or ROE is an important factor to be considered by a shareholder as it indicates how effectively their capital is being reinvested. In other words, this reveals that the company has been successful in turning shareholder investments into profits.
Check out our latest analysis for AsiaMedic.
How is ROE calculated?
of Formula for calculating return on equity teeth:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, the ROE for Asia Medic is:
23% = S$2.6 million ÷ S$12 million (based on trailing twelve months to June 2023).
“Return” is the profit over the past 12 months. This means that for every S$1 worth of shareholders' equity, the company generated S$0.23 in profit.
Why is ROE important for profit growth?
So far, we have learned that ROE measures how efficiently a company is generating its profits. 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”. Assuming all else is equal, companies with both higher return on equity and higher profit retention typically have higher growth rates when compared to companies that don't have the same characteristics.
AsiaMedic's revenue growth and ROE of 23%
First, we note that Asia Medic's ROE is very high. Secondly, we can't ignore the comparison to the average ROE of 11% reported by the industry. So Asiamedic's impressive 60% increase in net profit over the last five years isn't all that surprising.
As a next step, we compared Asia Medic'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 9.7%.
The foundations that give a company value have a lot to do with its revenue growth. It's important for investors to know whether the market is pricing in a company's expected earnings growth (or decline). This can help you decide whether to position the stock for a bright or bleak future. If you're wondering about AsiaMedic's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Is AsiaMedic reinvesting its profits efficiently?
AsiaMedic does not pay dividends to shareholders. This means that the company reinvests all of its profits back into the business. This is likely what is driving the high earnings growth rate discussed above.
summary
Overall, we are very satisfied with Asia Medic's performance. In particular, it's great to see that the company has invested heavily in its business, delivering strong revenue growth along with high rates of return. If the company continues to grow its revenue as it has, this could have a positive impact on the stock price, given how earnings per share affect the stock price over the long term. Remember, the stock price outcome also depends on the underlying risks that the company may face. Therefore, it is important for investors to be aware of the risks associated with the business. Our risks dashboard shows the four risks he has identified regarding AsiaMedic.
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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.
