ASMedia Technology (TWSE:5269) stock has increased by a significant 27% over the past three months. Given that the market rewards strong financials in the long run, I wonder if that will be the case this time as well. In particular, I would like to pay attention to ASMedia Technology's ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder as it indicates how effectively their capital is being reinvested. In other words, ROE shows the profit generated per dollar of a shareholder's investment.

Check out our latest analysis for ASMedia Technology.

How do you calculate return on equity?

of ROE calculation formula teeth:

Return on equity = Net income (from continuing operations) ÷ Shareholders' equity

So, based on the above formula, ASMedia Technology's ROE is:

11% = NT$2.2 billion ÷ NT$20 billion (based on the trailing 12 months to December 2023).

“Return” refers to a company's earnings over the past year. Another way to think of it is that for every NT$1 worth of stock, the company could earn him a profit of NT$0.11.

What relationship does ROE have with profit growth?

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. Generally speaking, other things being equal, companies with high return on equity and profit retention will have higher growth rates than companies without these attributes.

A side-by-side comparison of ASMedia Technology's revenue growth and ROE of 11%.

First, ASMedia Technology's ROE looks acceptable. Furthermore, the company's ROE is in line with the industry average of 9.5%. This certainly gives some context to the modest 15% growth in ASMedia Technology's net income over the past five years.

As a next step, we compared ASMedia Technology's net income growth with its industry and found that the company has a similar growth rate when compared to the industry's average growth rate of 18% over the same period.

Past revenue growth
TWSE:5269 Historical Revenue Growth Rate March 29, 2024

Earnings growth is an important metric to consider when evaluating a stock. Investors should check whether expected earnings growth or decline has been factored in in any case. By doing so, you can find out if the stock is headed for clear blue waters or if a swamp awaits. Is ASMedia Technology significantly valued compared to other companies? These 3 metrics can help you decide.

Is ASMedia Technology effectively utilizing its retained earnings?

ASMedia Technology's three-year median payout ratio is a very high 55%, meaning it only reinvests 45% into the business. This means that the company has been able to achieve decent profit growth even though it is returning most of its profits to shareholders.

Additionally, ASMedia Technology has been paying dividends for at least 10 years. This means that the company is quite serious about sharing profits with shareholders. According to our latest analyst data, the company's future payout ratio over the next three years is expected to be around 60%. Still, ASMedia Technology's future ROE is projected to rise to his 28%, even though the company's dividend payout ratio is not expected to change much.


Overall, I'm pretty satisfied with ASMedia Technology's performance. In particular, high ROE has contributed to the remarkable growth in business results. Despite reinvesting only a small portion of its profits, the company has still managed to grow its earnings, which is commendable. That said, the latest analyst forecasts suggest that the company's revenue will continue 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 .

Valuation is complex, but we help make it simple.

Please check it out AS Media Technology Could be overvalued or undervalued, check out our comprehensive analysis. Fair value estimates, risks and caveats, dividends, insider trading, and financial health.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, 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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