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Most readers would already know that the Techbond Group Berhad (KLSE:TECHBND) share price has increased 3.8% in the last month. Given that the market rewards strong financials in the long run, I wonder if that will be the case this time as well. In this article, we decided to focus on Tech Bond Group Berhad’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 Techbond Group Berhad.
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, Techbond Group Berhad’s ROE is:
8.9% = RM16m ÷ RM175m (Based on trailing 12 months to December 2023).
“Return” is the annual profit. Another way to think of it is that for every RM1 worth of shares, the company allowed him to earn a profit of RM0.09.
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. 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 Techbond Group Berhad’s earnings growth and ROE of 8.9%.
At first glance, Techbond Group Berhad’s ROE does not look very attractive. However, upon closer inspection, we find that the company’s ROE is higher than the industry average of his 5.1%, which is hard to miss. This certainly gives some context to his modest 8.8% growth in Techbond Group Berhad’s net profit seen over the past five years. Note that the company’s ROE is moderately low. It’s just that the industry’s ROE is low. So there could be some other aspects that are causing the increase in revenue. For example, the company may have a low payout ratio or be in a high-growth industry.
We then compared Techbond Group Berhad’s net income growth to its industry. The results revealed that the company’s growth rate is on par with the industry’s average growth rate of 8.1% over the same five-year period.
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. 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 check whether Techbond Group Berhad is trading on a higher or lower P/E ratio, relative to its industry.
Does Techbond Group Berhad reinvest its profits efficiently?
Techbond Group Berhad has a healthy combination of a decent three-year median payout ratio of 26% (or a retention rate of 74%) and decent earnings growth, as seen above. . This means that the company is utilizing its funds efficiently. Of that profit.
Furthermore, Techbond Group Berhad is determined to continue sharing its profits with shareholders, as can be gleaned from its long history of dividend payments over five years.
summary
Overall, we’re very satisfied with Techbond Group Berhad’s performance. In particular, it’s great to see that the company is seeing strong earnings growth, backed by an excellent ROE and high reinvestment rate. Having said that, a look at current analyst forecasts shows that the company’s earnings are expected to gain momentum. Learn more about the company’s future revenue growth forecasts here. free Create a report on analyst forecasts to learn more about the company.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
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.
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