Most readers would already know that the Atul Lifestyle Holdings (NASDAQ:ATAT) stock has increased by a significant 5.5% over the last month. Since the market usually pays for a company's long-term fundamentals, we decided to investigate whether a company's key performance indicators are influencing the market. Specifically, we decided to examine Atour Lifestyle Holdings' ROE in this article.
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 Atul Lifestyle Holdings.
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, Atul Lifestyle Holdings' ROE is:
24% = CA$437 million ÷ CA$1.8 billion (based on trailing twelve months to September 2023).
“Revenue” is the income a company has earned over the past year. Another way to think of it is that for every $1 worth of stock, the company was able to earn him $0.24 in profit.
What is the relationship between ROE and profit growth rate?
It has already been established that ROE serves as an indicator of how efficiently a company will generate future profits. Depending on how much of these profits a company reinvests or “retains”, and how effectively it does so, we are then able to assess a company's earnings 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.
Atour Lifestyle Holdings' Revenue Growth and ROE 24%
First of all, we like that Atul Lifestyle Holdings has a good ROE. Secondly, we can't ignore the comparison to the average ROE of 16% reported by the industry. As a result, his exceptional 52% growth in Atour Lifestyle Holdings' net profit over the past five years is not surprising.
We then compared Atul Lifestyle Holdings'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 20%.
The foundations that give a company value have a lot to do with its revenue growth. The next thing investors need to determine is whether the expected earnings growth is already built into the stock price, or the lack thereof. That way, you'll know if the stock is headed for clear blue waters or if a swamp awaits. If you're wondering about Atour Lifestyle Holdings's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Is Atour Lifestyle Holdings effectively utilizing its internal reserves?
Atul Lifestyle Holdings 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're pretty happy with Atul Lifestyle Holdings' 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. We also examined the latest analyst forecasts and found that the company's earnings growth rate is expected to be similar to its current growth rate. To know more about the latest analyst forecasts for the company, check out this visualization of analyst forecasts 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.
