Is Cury Construtora e Incorporadora S.A.'s (BVMF:CURY3) Recent Performance Tethered To Its Attractive Financial Prospects?

Cury Construtora e Incorporadora's (BVMF:CURY3) stock up by 4.1% over the past month. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. Particularly, we will be paying attention to Cury Construtora e Incorporadora'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. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

Check out our latest analysis for Cury Construtora e Incorporadora

How Is ROE Calculated?

Return on equity 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 Cury Construtora e Incorporadora is:

29% = R$182m ÷ R$631m (Based on the trailing twelve months to September 2020).

The 'return' is the yearly profit. Another way to think of that is that for every R$1 worth of equity, the company was able to earn R$0.29 in profit.

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Cury Construtora e Incorporadora's Earnings Growth And 29% ROE

To begin with, Cury Construtora e Incorporadora seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 14%. Probably as a result of this, Cury Construtora e Incorporadora was able to see a decent growth of 5.3% over the last five years.

Next, on comparing with the industry net income growth, we found that Cury Construtora e Incorporadora's reported growth was lower than the industry growth of 11% in the same period, which is not something we like 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 CURY3 worth today? The intrinsic value infographic in our free research report helps visualize whether CURY3 is currently mispriced by the market.

Is Cury Construtora e Incorporadora Making Efficient Use Of Its Profits?

Summary

Overall, we are quite pleased with Cury Construtora e Incorporadora'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 a good amount of growth in its earnings. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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