Cyrela Brazil Realty S.A. Empreendimentos e Participações (BVMF:CYRE3) Is Going Strong But Fundamentals Appear To Be Mixed : Is There A Clear Direction For The Stock?

Cyrela Brazil Realty Empreendimentos e Participações (BVMF:CYRE3) has had a great run on the share market with its stock up by a significant 20% over the last three months. However, we decided to pay attention to the company's fundamentals which don't appear to give a clear sign about the company's financial health. Specifically, we decided to study Cyrela Brazil Realty Empreendimentos e Participações' ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Is ROE Calculated?

The formula for ROE is:

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

So, based on the above formula, the ROE for Cyrela Brazil Realty Empreendimentos e Participações is:

19% = R$2.1b ÷ R$11b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. That means that for every R$1 worth of shareholders' equity, the company generated R$0.19 in profit.

Check out our latest analysis for Cyrela Brazil Realty Empreendimentos e Participações

Why Is ROE Important For 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.

Cyrela Brazil Realty Empreendimentos e Participações' Earnings Growth And 19% ROE

At first glance, Cyrela Brazil Realty Empreendimentos e Participações' ROE doesn't look very promising. A quick further study shows that the company's ROE doesn't compare favorably to the industry average of 33% either. Therefore, Cyrela Brazil Realty Empreendimentos e Participações' flat earnings over the past five years can possibly be explained by the low ROE amongst other factors.

Next, on comparing with the industry net income growth, we found that Cyrela Brazil Realty Empreendimentos e Participações' reported growth was lower than the industry growth of 4.6% over the last few years, which is not something we like to see.

Earnings growth is an important metric to consider when valuing a stock. 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. What is CYRE3 worth today? The intrinsic value infographic in our free research report helps visualize whether CYRE3 is currently mispriced by the market.

Is Cyrela Brazil Realty Empreendimentos e Participações Efficiently Re-investing Its Profits?

Cyrela Brazil Realty Empreendimentos e Participações' low three-year median payout ratio of 23%, (meaning the company retains77% of profits) should mean that the company is retaining most of its earnings and consequently, should see higher growth than it has reported.

Additionally, Cyrela Brazil Realty Empreendimentos e Participações has paid dividends over a period of at least ten years, which means that the company's management is determined to pay dividends even if it means little to no earnings growth. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 28% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Conclusion

Overall, we have mixed feelings about Cyrela Brazil Realty Empreendimentos e Participações. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. 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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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.