Intelbras S.A. - Indústria de Telecomunicação Eletrônica Brasileira's (BVMF:INTB3) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

With its stock down 24% over the past three months, it is easy to disregard Intelbras - Indústria de Telecomunicação Eletrônica Brasileira (BVMF:INTB3). However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. Particularly, we will be paying attention to Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's ROE today.

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 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 Intelbras - Indústria de Telecomunicação Eletrônica Brasileira is:

15% = R$455m ÷ R$3.1b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. Another way to think of that is that for every R$1 worth of equity, the company was able to earn R$0.15 in profit.

View our latest analysis for Intelbras - Indústria de Telecomunicação Eletrônica Brasileira

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's Earnings Growth And 15% ROE

On the face of it, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's ROE is not much to talk about. Although a closer study shows that the company's ROE is higher than the industry average of 8.2% which we definitely can't overlook. Consequently, this likely laid the ground for the decent growth of 12% seen over the past five years by Intelbras - Indústria de Telecomunicação Eletrônica Brasileira. Bear in mind, the company does have a moderately low ROE. It is just that the industry ROE is lower. Therefore, the growth in earnings could also be the result of other factors. Such as- high earnings retention or the company belonging to a high growth industry.

Next, on comparing with the industry net income growth, we found that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's growth is quite high when compared to the industry average growth of 9.5% in the same period, which is great to see.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is INTB3 fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Intelbras - Indústria de Telecomunicação Eletrônica Brasileira Efficiently Re-investing Its Profits?

Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has a three-year median payout ratio of 30%, which implies that it retains the remaining 70% of its profits. This suggests that its dividend is well covered, and given the decent growth seen by the company, it looks like management is reinvesting its earnings efficiently.

Additionally, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira has paid dividends over a period of four years which means that the company is pretty serious about sharing its profits with shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 28%. However, Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's ROE is predicted to rise to 19% despite there being no anticipated change in its payout ratio.

Conclusion

On the whole, we feel that Intelbras - Indústria de Telecomunicação Eletrônica Brasileira's performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business at a moderate rate of return. Unsurprisingly, this has led to an impressive earnings growth. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.