Most readers would already know that the INFICON Holding (VTX:IFCN) share price has increased by 8.2% 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. In particular, I would like to pay attention to INFICON Holding's ROE today.
Return on equity or ROE tests how effectively a company is growing its value and managing investors' money. More simply, it measures a company's profitability in relation to shareholder equity.
Check out our latest analysis for INFICON Holding.
How do you calculate return on equity?
of Formula for calculating return on equity teeth:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, INFICON Holding's ROE is:
31% = USD 106 million ÷ USD 340 million (based on trailing twelve months to December 2023).
“Return” refers to a company's earnings over the past year. This means that for every CHF 1 worth of shareholders' equity, the company generated CHF 0.31 in profit.
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. 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. 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.
INFICON Holding's earnings growth and ROE of 31%
Firstly, INFICON Holding has a very high ROE which is interesting. Moreover, his ROE for the company is high compared to the industry average of his 9.3%, which is quite noteworthy. Perhaps this laid the foundation for the modest 15% net profit growth his INFICON Holding has seen over the past five years.
We then compared INFICON Holding's net income growth rate to its industry. The same he found that the company's growth rate was high when compared to the industry where in five years he recorded a growth rate of 9.3%.
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 INFICON Holding's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Is INFICON Holding using its profits efficiently?
INFICON Holding's median three-year dividend payout ratio is 65% (meaning it retains 35% of its profits), but the company has had considerable earnings growth in the past, and its high payout ratio is means unobstructed. Its ability to grow.
Additionally, INFICON Holding has been paying dividends for at least 10 years. This means that the company is quite serious about sharing profits with shareholders. After researching the latest analyst consensus data, we find that the company's future dividend payout ratio is expected to decline to 49% over the next three years. In any case, the company's ROE is not expected to change much, despite the lower expected dividend payout ratio.
conclusion
Overall, we are very satisfied with INFICON Holding's performance. In particular, the high ROE is noteworthy and is considered to be the basis for the significant profit growth. But the company keeps a small portion of its profits. That means the company was able to grow its revenue despite this, so that's not too bad. That said, the company's revenue growth is expected to slow, according to the latest industry analyst forecasts. Learn more about the company's future revenue growth forecasts here. free Create a report on analyst forecasts to learn more about a 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.
