All For One Group (ETR:A1OS) has been doing well on the stock market, with its share price increasing by a significant 20% over the past three months. Considering that stock prices are typically in line with a company's financial performance over the long term, we take a closer look at financial indicators to see if they are influencing recent stock price movements. I made it. In particular, I would like to pay attention to All For One Group's 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. In other words, it is a profitability ratio that measures the rate of return on the capital provided by a company's shareholders.
Check out our latest analysis for All for One Group.
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, All for One Group's ROE is:
11% = €12 million ÷ €109 million (based on the trailing twelve months to December 2023).
“Return” is the annual profit. One way he conceptualizes this is that for every €1 of shareholders' equity, the company made his €0.11 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. 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”. All else being equal, companies with higher return on equity and profit retention typically have higher growth rates compared to companies that don't have the same characteristics.
All for One Group's revenue growth and ROE 11%
Firstly, All For One Group seems to have a respectable ROE. Even compared to the industry average of 9.2%, the company's ROE looks pretty decent. Given this situation, we can't help but wonder why All For One Group has grown so little over the past five years. Therefore, there may be some other aspects that could potentially be hindering the company's growth. For example, if a company pays out a large portion of its earnings as dividends or if it faces competitive pressures.
As a next step, we compared All for One Group's net income growth to its industry and found that the industry has grown at an average of 14% over the same period.
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). This can help you decide whether to position the stock for a bright or bleak future. 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 might want to see whether All for One Group is trading on a higher or lower P/E ratio, relative to its industry.
Is All for One Group making effective use of its internal reserves?
All for One Group's median three-year dividend payout ratio is a high 61% (or retention rate of 39%), meaning 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, All For One Group has been paying dividends for at least 10 years, meaning the company's management is determined to pay dividends even if earnings growth means little . After researching the latest analyst consensus data, we find that the company's future dividend payout ratio is expected to drop to 36% over the next three years. The company's ROE is expected to rise to 18% over the same period, which can be explained by the lower dividend payout ratio.
summary
Overall, we feel that the All for One group certainly has some positive elements to consider. However, the low profit growth is a bit concerning, especially considering the company's high profitability. Investors could have benefited from a higher ROE if the company had reinvested more of its profits. As mentioned earlier, the company retains a small portion of its profits. Having said that, we researched the latest analyst forecasts and found that while the company has seen its earnings shrink in the past, analysts expect its future earnings to grow. Are these analyst forecasts based on broader expectations for the industry, or are they based on the company's fundamentals? Click here to be taken to our analyst forecasts page for 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.
