It's hard to get excited about the recent performance of Patek Fitwell Tube Components (NSE:PATTECH), which has seen its share price drop 11% over the past week. However, stock prices are usually driven by a company's financial health in the long run, and in this case it looks pretty respectable. Specifically, we decided to study Pattech Fitwell Tube Components' ROE in this article.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it receives from its shareholders. In other words, ROE shows the return that each dollar of a shareholder's investment generates.
Check out our latest analysis for Pattech Fitwell Tube Components.
How do I 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, the ROE for Pattech Fitwell Tube Components is:
5.0% = ₹9.2m ÷ ₹183m (Based on trailing 12 months to September 2023).
“Earnings” is the amount of your after-tax earnings over the past 12 months. This means that for every £1 of shareholders' equity, the company generated £0.05 of profit.
What is the relationship between ROE and profit growth?
So far, we have learned that ROE measures how efficiently a company is generating its profits. We are then able to evaluate a company's future ability to generate profits based on how much of its profits it chooses to reinvest or “retain”. 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.
Pattech Fitwell Tube Components' Revenue Growth and ROE 5.0%
It's hard to argue that Pattech Fitwell Tube Components' ROE is very good on its own. Even compared to the industry average of 14%, the ROE figure is quite disappointing. Nevertheless, surprisingly, Pattech Fitwell Tube Components has grown its net income by an exceptional 37% over the past five years. Therefore, there may be other reasons behind this growth. Maintaining high profits and efficient management, etc.
We then compared Pattech Fitwell Tube Components' net income growth to its industry. The same he is pleased to find that the company's growth rate is high when compared to the industry where in five years he showed a growth rate of 20%.
The foundations that give a company value have a lot to do with its revenue growth. The next thing investors need to determine is whether the expected earnings growth is already built into the stock price, or the lack thereof. That way, you'll know if the stock is headed for clear blue waters or if a swamp awaits. Is Pattech Fitwell Tube Components a good value compared to other companies? These 3 rating scales may help you decide.
Is Pattech Fitwell Tube Components making effective use of its retained earnings?
Given that Pattech Fitwell Tube Components doesn't pay dividends to shareholders, we can assume that the company reinvests all of its profits into growing its business.
summary
Overall, it looks like there are some positive aspects to Pattech Fitwell Tube Components' business. Despite low profit margins, the company recorded impressive revenue growth as a result of significant reinvestment in the business. We don't want to completely fire the company, but we do try to see how risky the business is in order to make more informed decisions about the company. Visit our website to learn about the three risks we have identified regarding Pattech Fitwell tubing components. risk dashboard It is available for free on this platform.
Valuation is complex, but we help make it simple.
Check out our comprehensive analysis, including below, to see if Pattech Fitwell Tube Components is potentially overvalued or undervalued. 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 based on historical data and analyst forecasts using only unbiased methodologies, and the articles are not intended as 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.
