The UTS Marketing Solutions Holdings (HKG:6113) share price has increased by a significant 11% over the past week. However, since it is ultimately a company's long-term financial performance that determines market outcomes, we decided to focus on its weak fundamentals in this article. In particular, I would like to pay attention to UTS Marketing Solution Holdings' ROE today.
Return on equity or ROE is a key measure used to evaluate how efficiently a company's management is utilizing the company's capital. Simply put, it is used to evaluate a company's profitability compared to its equity.
Check out our latest analysis for UTS Marketing Solutions Holdings.
How is ROE calculated?
ROE can be calculated using the following formula:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, UTS Marketing Solutions Holdings' ROE is:
5.9% = RM3.1m ÷ RM53m (Based on trailing 12 months to June 2023).
“Earnings” is the amount of your after-tax earnings over the past 12 months. One way he conceptualizes this is that for every HK$1 of shareholders' equity, the company earned him HK$0.06 in profit.
What relationship does ROE have with profit growth?
It has already been established that ROE serves as an indicator of how efficiently a company will generate future profits. Now we need to assess how much profit the company reinvests or “retains” for future growth, which gives us an idea about the company's growth potential. Generally, other things being equal, companies with high return on equity and profit retention will have higher growth rates than companies without these attributes.
UTS Marketing Solutions Holdings' revenue growth and ROE 5.9%
At first glance, UTS Marketing Solutions Holdings' ROE doesn't seem to be all that interesting. We then compared our company's ROE with the broader industry and were disappointed to find that its ROE is lower than the industry average of 11%. Therefore, UTS Marketing Solutions Holdings' flat earnings over the past five years could be explained, among other things, by its low ROE.
We then compared UTS Marketing Solutions Holdings's net income growth with its industry and found that the industry's average growth rate over the same five-year period was 24%.
Earnings growth is a big factor in stock valuation. 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 UTS Marketing Solutions Holdings's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Does UTS Marketing Solutions Holdings reinvest profits effectively?
UTS Marketing Solutions Holdings' median three-year dividend payout ratio is a high 67% (or retention rate of 33%), which means the company pays out most of its profits to shareholders as dividends. This may go some way to explaining why earnings haven't grown.
Additionally, UTS Marketing Solutions Holdings has been paying dividends for six years. This means the company's management is determined to pay a dividend, even if earnings growth means little.
conclusion
Overall, I would be very cautious before making a decision about UTS Marketing Solutions Holdings. The company's earnings growth has been slow because very little of its profits are retained, and even when they are retained, they are reinvested at very low rates of return. Until now, we've only skimmed the surface of the company's past performance by looking at the company's fundamentals.So it might be worth checking this free Detailed graph View UTS Marketing Solutions Holdings' past earnings, revenue, and cash flow to gain deeper insight into the company's performance.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if UTS Marketing Solutions Holdings is potentially overvalued or undervalued. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.
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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.
