Karin Technology Holdings (SGX:K29) stock has increased by 8.2% over the past three months. As most people know, long-term fundamentals have a strong correlation with market price movements, so today we'll take a look at the company's key financial metrics and see if they play any role in the recent price movement. I decided to decide whether it was working or not. In particular, I would like to pay attention to Karin Technology Holdings' ROE today.
ROE or return on equity is a useful tool for evaluating how effectively a company can generate returns on the investment it receives from its shareholders. More simply, it measures a company's profitability in relation to shareholder equity.
Check out our latest analysis for Karin Technology Holdings.
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, Karin Technology Holdings' ROE is:
11% = HK$45 million ÷ HK$406 million (based on 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 S$1 worth of shareholders' equity, the company generated S$0.11 in profit.
Why is ROE important for profit growth?
So far, we have learned that ROE is a measure of a company's profitability. 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 all else is equal, companies with both higher return on equity and higher profit retention typically have higher growth rates when compared to companies that don't have the same characteristics.
A side-by-side comparison of Karin Technology Holdings' earnings growth and ROE of 11%.
First, Karin Technology Holdings' ROE looks acceptable. Moreover, his ROE for the company is in line with the industry average of 11%. This certainly gives some context to the modest 11% growth in Karin Technology Holdings' net profit over the past five years.
We then compared Karin Technology Holdings's net income growth rate with its industry and found that the company's reported growth rate is similar to the industry's average growth rate of 9.8% over the past few years.
Earnings growth is a big factor in stock valuation. The next thing investors need to determine is whether the expected earnings growth is already built into the stock price, or the lack thereof. Doing so will help you determine whether a stock's future is promising or ominous. What is His K29 worth today? Free research report's intrinsic value infographic helps you visualize whether K29 is currently mispriced on the market.
Is Karin Technology Holdings using its profits effectively?
Karin Technology Holdings' high three-year median payout ratio of 115% suggests that the company is paying out more in dividends than it earned to shareholders. Nevertheless, as we saw above, the company was able to successfully grow its revenue. Even if for some reason the company were to run into problems and its performance deteriorated, its high dividend payout ratio would still be worth paying attention to. The risks dashboard displays the three risks he has identified for Karin Technology Holdings.
Additionally, Karin Technology Holdings has been paying dividends for at least 10 years. This means that the company is quite serious about sharing profits with shareholders.
summary
Overall, we feel that Karin Technology Holdings certainly has some positive factors to consider. Specifically, high ROE is thought to lead to profit growth. Note that the company reinvests very little of its profits. This means that investors are not necessarily reaping the full benefit of higher rates of return. Until now, we've only skimmed the surface of the company's past performance by looking at the company's fundamentals. Explore Karin Technology Holdings for free and check its past performance. Detailed graph Analysis of past profits, revenue, and cash flows.
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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.
