CAB Kakran Corporation Berhad (KLSE:CAB) has performed brilliantly on the stock market with its stock up a significant 20% in the last month. Given the company’s impressive performance, we decided to study its financial indicators more closely as a company’s financial position in the long term usually determines market outcomes. Specifically, we’ll be paying attention to CAB Cakaran Corporation Berhad’s ROE today.
Return on equity or ROE is an important measure used to assess how efficiently a company’s management is using the company’s capital. In other words, it reflects the company’s success in converting shareholder investments into profits.
See our latest analysis for CAB Kakaran Corporation Berhad
How do you calculate return on equity?
ROE can be calculated using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for CAB Kaikaran Corporation Berhad is:
17% = RM131m ÷ RM763m (based on trailing twelve months to June 2023).
‘Return’ is the annual profit. This means that for every MYR1 worth of shareholders’ equity, the company earned MYR0.17 profit.
What does ROE have to do with earnings growth?
So far, we have learned that ROE measures how efficiently a company is generating its profits. Now we need to evaluate how much profit the company reinvests or “retains” for future growth, which tells us about the company’s growth potential. Assuming everything else is equal, companies that have both high returns on equity and high profit retention generally have higher growth rates than companies that do not have the same characteristics.
CAB Kakran Corporation Berhad’s earnings growth and ROE of 17%
At first glance, CAB Kaikaran Corporation Berhad looks to have a good ROE. The company’s ROE looks quite impressive, especially when compared to the industry average of 7.6%. This certainly adds some context to the extraordinary 37% net income growth CAB Kakran Corporation Berhad has seen over the last five years. We believe other factors may also be at play here. For example, it is possible that the company’s management has made some good strategic decisions, or the company has a low payout ratio.
We then compared CAB Cacaran Corporation Berhad’s net income growth with the industry and we were pleased to see that the company’s growth figure is higher than the industry, which has a growth rate of 23% over the same 5-year period .
past earnings growth
Earnings growth is an important metric to consider when evaluating a stock. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, has been priced in. Doing this will help them establish whether the stock’s future looks promising or ominous. Is CAB Kaikaran Corporation Berhad fairly valued compared to other companies? These 3 evaluation measures can help you decide.
Is CAB Kakran Corporation Berhad making efficient use of its profits?
Given that CAB Kakran Corporation Berhad does not pay any dividends to its shareholders, we infer that the company is reinvesting all of its profits to grow its business.
Overall, we are quite pleased with the performance of CAB Cikaran Corporation Berhad. In particular, we like that the company is reinvesting a large portion of its profits at a high rate of return. Undoubtedly, this has seen a substantial increase in the company’s earnings.
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This article from Simply Wall St is of a general nature. We only provide commentary based on historical data and analyst forecasts using unbiased methodology and our articles are not intended to provide financial advice. It does not recommend buying or selling any stock, and does not take into account your objectives, or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.