Interroll Holding (VTX:INRN) has had a great run on the stock market, with its share price up a significant 14% over the past three months. 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. In this article, we decided to focus on Interroll Holding's ROE.
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 Interroll Holding.
How do you calculate return on equity?
Return on equity can be calculated using the following formula:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, Interroll Holding's ROE is:
16% = CHF 66 million ÷ CHF 411 million (based on the trailing twelve months to December 2023).
“Earnings” is the amount of your after-tax earnings over the past 12 months. This means that for every CHF 1 a shareholder invests, the company will generate a profit of CHF 0.16 for him.
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. 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. Assuming everything else remains constant, the higher the ROE and profit retention, the higher the company's growth rate compared to companies that don't necessarily have these characteristics.
A side-by-side comparison of Interroll Holding's earnings growth and ROE of 16%.
Firstly, Interroll Holding appears to have a respectable ROE. Moreover, his ROE for the company is in line with the industry average of 18%. This certainly gives some context to his modest 7.5% growth in Interroll Holding's net profit over the past five years.
We then compared Interroll Holding's net income growth rate with the industry and found that the company's reported growth rate is similar to the industry's average growth rate of 8.1% over the past few years.
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 Interroll Holding's valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
Is Interroll Holding using its profits efficiently?
With a median three-year payout ratio of 32% (meaning the company retains 68% of its profits), Interroll Holding is poised for substantial earnings growth and a healthy dividend payout. seems to be reinvesting efficiently. covered.
Additionally, Interroll Holding has been paying dividends for at least 10 years. This shows that the company is committed to sharing profits with shareholders. After reviewing the latest analyst consensus data, we found that the company is expected to continue paying out around 37% of its profit over the next three years. In any case, Interroll Holding's future ROE is expected to rise to his 20%, although no major changes are expected in the dividend payout ratio.
conclusion
Overall, we feel that Interroll Holding is doing very well. In particular, we like that the company is reinvesting heavily in its business and has a high rate of return. Unsurprisingly, this led to impressive revenue growth. Having said that, a look at current analyst forecasts shows that the company's earnings are expected to gain momentum. 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 the articles are not intended as 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.
