Advertisement
Singapore markets closed

  • Straits Times Index

    3,439.88
    +24.37 (+0.71%)
     

  • S&P 500

    5,537.02
    +28.01 (+0.51%)
     

  • Dow

    39,308.00
    -23.90 (-0.06%)
     

  • Nasdaq

    18,188.30
    +159.54 (+0.88%)
     

  • Bitcoin USD

    57,318.54
    -2,943.34 (-4.88%)
     

  • CMC Crypto 200

    1,193.25
    -67.94 (-5.39%)
     

  • FTSE 100

    8,230.67
    +59.55 (+0.73%)
     

  • Gold

    2,369.40
    0.00 (0.00%)
     

  • Crude Oil

    83.76
    -0.12 (-0.14%)
     

  • 10-Yr Bond

    4.3550
    0.0000 (0.00%)
     

  • Nikkei

    40,913.65
    +332.89 (+0.82%)
     

  • Hang Seng

    18,028.28
    +49.71 (+0.28%)
     

  • FTSE Bursa Malaysia

    1,616.75
    +1.43 (+0.09%)
     

  • Jakarta Composite Index

    7,220.89
    +24.13 (+0.34%)
     

  • PSE Index

    6,507.49
    +57.46 (+0.89%)
     

Are DoubleVerify Holdings, Inc.'s (NYSE:DV) Fundamentals Good Enough to Warrant Buying Given The Stock's Recent Weakness?

editorial-team@simplywallst.com (Simply Wall St)
·3-min read

DoubleVerify Holdings (NYSE:DV) has had a rough three months with its share price down 41%. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. In this article, we decided to focus on DoubleVerify Holdings' ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

Check out our latest analysis for DoubleVerify Holdings

How Is ROE Calculated?

The formula for ROE is:

ADVERTISEMENT

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for DoubleVerify Holdings is:

6.1% = US$66m ÷ US$1.1b (Based on the trailing twelve months to March 2024).

The 'return' is the profit over the last twelve months. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.06.

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

DoubleVerify Holdings' Earnings Growth And 6.1% ROE

When you first look at it, DoubleVerify Holdings' ROE doesn't look that attractive. A quick further study shows that the company's ROE doesn't compare favorably to the industry average of 12% either. In spite of this, DoubleVerify Holdings was able to grow its net income considerably, at a rate of 37% in the last five years. So, there might be other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

We then compared DoubleVerify Holdings' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 13% in the same 5-year period.

past-earnings-growth
past-earnings-growth

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is DoubleVerify Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is DoubleVerify Holdings Using Its Retained Earnings Effectively?

DoubleVerify Holdings doesn't pay any regular dividends to its shareholders, meaning that the company has been reinvesting all of its profits into the business. This is likely what's driving the high earnings growth number discussed above.

Summary

Overall, we feel that DoubleVerify Holdings certainly does have some positive factors to consider. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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 only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com