Has Vossloh AG's (ETR:VOS) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

Vossloh's (ETR:VOS) stock is up by a considerable 23% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Vossloh's ROE.

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. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How To 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 Vossloh is:

9.3% = €71m ÷ €761m (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. That means that for every €1 worth of shareholders' equity, the company generated €0.09 in profit.

View our latest analysis for Vossloh

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.

Vossloh's Earnings Growth And 9.3% ROE

At first glance, Vossloh's ROE doesn't look very promising. Yet, a closer study shows that the company's ROE is similar to the industry average of 10%. Looking at Vossloh's exceptional 31% five-year net income growth in particular, we are definitely impressed. Given the slightly low ROE, it is likely that there could be some other aspects that are driving this growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that Vossloh's growth is quite high when compared to the industry average growth of 17% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. What is VOS worth today? The intrinsic value infographic in our free research report helps visualize whether VOS is currently mispriced by the market.

Is Vossloh Making Efficient Use Of Its Profits?

Vossloh's three-year median payout ratio is a pretty moderate 41%, meaning the company retains 59% of its income. By the looks of it, the dividend is well covered and Vossloh is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.

Moreover, Vossloh is determined to keep sharing its profits with shareholders which we infer from its long history of seven years of paying a dividend. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to drop to 30% over the next three years. As a result, the expected drop in Vossloh's payout ratio explains the anticipated rise in the company's future ROE to 13%, over the same period.

Conclusion

Overall, we feel that Vossloh certainly does have some positive factors to consider. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts 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.