Yahoo Finance Is Pantech Group Holdings Berhad's (KLSE:PANTECH) Latest Stock Performance Being Led By Its Strong Fundamentals?
Pantech Group Holdings Berhad's (KLSE:PANTECH) stock is up by 4.4% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Particularly, we will be paying attention to Pantech Group Holdings Berhad's ROE today.
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. Put another way, it reveals the company's success at turning shareholder investments into profits.
Check out our latest analysis for Pantech Group Holdings Berhad
How Is ROE Calculated?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Pantech Group Holdings Berhad is:
12% = RM100m ÷ RM867m (Based on the trailing twelve months to November 2023).
The 'return' refers to a company's earnings over the last year. So, this means that for every MYR1 of its shareholder's investments, the company generates a profit of MYR0.12.
What Is The Relationship Between ROE And Earnings Growth?
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.
A Side By Side comparison of Pantech Group Holdings Berhad's Earnings Growth And 12% ROE
At first glance, Pantech Group Holdings Berhad seems to have a decent ROE. Especially when compared to the industry average of 6.1% the company's ROE looks pretty impressive. This certainly adds some context to Pantech Group Holdings Berhad's exceptional 29% net income growth seen over the past five years. We reckon that there could also be other factors at play here. Such as - high earnings retention or an efficient management in place.
Next, on comparing Pantech Group Holdings Berhad's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 24% over the last few years.
Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Is Pantech Group Holdings Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Pantech Group Holdings Berhad Efficiently Re-investing Its Profits?
Pantech Group Holdings Berhad's three-year median payout ratio is a pretty moderate 44%, meaning the company retains 56% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Pantech Group Holdings Berhad is reinvesting its earnings efficiently.
Moreover, Pantech Group Holdings Berhad is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 49% of its profits over the next three years. Accordingly, forecasts suggest that Pantech Group Holdings Berhad's future ROE will be 11% which is again, similar to the current ROE.
Conclusion
Overall, we are quite pleased with Pantech Group Holdings Berhad's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts 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 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.
