Its Easy to Overlook Intervest Offices & Warehouses nv (EBR:INTO) But Its Strong Financial Prospects Might Make You Want To Stop and Notice

By
Simply Wall St
Published
May 19, 2021
ENXTBR:INTO
Source: Shutterstock

It is easy to overlook Intervest Offices & Warehouses' (EBR:INTO) given its unimpressive and roughly flat price performance over the past week. Regardless, it's worth giving the company a closer given that its key financial performance indicators look pretty strong and that's usually rewarded by the markets in the long-run. Particularly, we will be paying attention to Intervest Offices & Warehouses' ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

View our latest analysis for Intervest Offices & Warehouses

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 Intervest Offices & Warehouses is:

11% = €63m ÷ €585m (Based on the trailing twelve months to March 2021).

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 €0.11.

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. 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.

A Side By Side comparison of Intervest Offices & Warehouses' Earnings Growth And 11% ROE

To begin with, Intervest Offices & Warehouses seems to have a respectable ROE. On comparing with the average industry ROE of 6.2% the company's ROE looks pretty remarkable. This probably laid the ground for Intervest Offices & Warehouses' significant 28% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Intervest Offices & Warehouses' growth is quite high when compared to the industry average growth of 15% in the same period, which is great to see.

past-earnings-growth
ENXTBR:INTO Past Earnings Growth May 20th 2021

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. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Intervest Offices & Warehouses''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Intervest Offices & Warehouses Making Efficient Use Of Its Profits?

Intervest Offices & Warehouses' three-year median payout ratio is a pretty moderate 45%, meaning the company retains 55% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Intervest Offices & Warehouses is reinvesting its earnings efficiently.

Additionally, Intervest Offices & Warehouses has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Looking at the current analyst consensus data, we can see that the company's future payout ratio is expected to rise to 90% over the next three years.

Conclusion

Overall, we are quite pleased with Intervest Offices & Warehouses' 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. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Not to forget, share price outcomes are also dependent on the potential risks a company may face. So it is important for investors to be aware of the risks involved in the business. You can see the 3 risks we have identified for Intervest Offices & Warehouses by visiting our risks dashboard for free on our platform here.

When trading Intervest Offices & Warehouses or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.