Is Plano & Plano Desenvolvimento Imobiliário S.A.'s (BVMF:PLPL3) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Most readers would already be aware that Plano & Plano Desenvolvimento Imobiliário's (BVMF:PLPL3) stock increased significantly by 19% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Plano & Plano Desenvolvimento Imobiliário's 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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Plano & Plano Desenvolvimento Imobiliário is:

43% = R$421m ÷ R$988m (Based on the trailing twelve months to June 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every R$1 of its shareholder's investments, the company generates a profit of R$0.43.

Check out our latest analysis for Plano & Plano Desenvolvimento Imobiliário

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

Plano & Plano Desenvolvimento Imobiliário's Earnings Growth And 43% ROE

First thing first, we like that Plano & Plano Desenvolvimento Imobiliário has an impressive ROE. Second, a comparison with the average ROE reported by the industry of 33% also doesn't go unnoticed by us. As a result, Plano & Plano Desenvolvimento Imobiliário's exceptional 26% net income growth seen over the past five years, doesn't come as a surprise.

We then compared Plano & Plano Desenvolvimento Imobiliário's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 7.0% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. What is PLPL3 worth today? The intrinsic value infographic in our free research report helps visualize whether PLPL3 is currently mispriced by the market.

Is Plano & Plano Desenvolvimento Imobiliário Making Efficient Use Of Its Profits?

Plano & Plano Desenvolvimento Imobiliário's three-year median payout ratio is a pretty moderate 34%, meaning the company retains 66% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Plano & Plano Desenvolvimento Imobiliário is reinvesting its earnings efficiently.

Moreover, Plano & Plano Desenvolvimento Imobiliário is determined to keep sharing its profits with shareholders which we infer from its long history of four years of paying a dividend. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 66% over the next three years. Regardless, the ROE is not expected to change much for the company despite the higher expected payout ratio.

Conclusion

Overall, we are quite pleased with Plano & Plano Desenvolvimento Imobiliário's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. 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.