BIEM.L.FDLKK GarmentLtd's (SZSE:002832) stock is up by 4.8% over the past three months. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to BIEM.L.FDLKK GarmentLtd's ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

How Do You Calculate Return On Equity?

ROE can be calculated by using the formula:

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

So, based on the above formula, the ROE for BIEM.L.FDLKK GarmentLtd is:

18% = CN¥972m ÷ CN¥5.3b (Based on the trailing twelve months to March 2024).

The 'return' refers to a company's earnings over the last year. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.18.

Why Is ROE Important For 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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes.

BIEM.L.FDLKK GarmentLtd's Earnings Growth And 18% ROE

At first glance, BIEM.L.FDLKK GarmentLtd seems to have a decent ROE. Especially when compared to the industry average of 7.1% the company's ROE looks pretty impressive. This probably laid the ground for BIEM.L.FDLKK GarmentLtd's significant 21% 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 with the industry net income growth, we found that BIEM.L.FDLKK GarmentLtd's growth is quite high when compared to the industry average growth of 1.3% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. 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. What is 002832 worth today? The intrinsic value infographic in our free research report helps visualize whether 002832 is currently mispriced by the market.

Is BIEM.L.FDLKK GarmentLtd Using Its Retained Earnings Effectively?

BIEM.L.FDLKK GarmentLtd's three-year median payout ratio to shareholders is 25%, which is quite low. This implies that the company is retaining 75% of its profits. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Moreover, BIEM.L.FDLKK GarmentLtd is determined to keep sharing its profits with shareholders which we infer from its long history of seven years of paying a dividend.

Summary

Overall, we are quite pleased with BIEM.L.FDLKK GarmentLtd's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. We also studied the latest analyst forecasts and found that the company's earnings growth is expected be similar to its current growth rate. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.