Waberer's International Nyrt.'s (BST:3WB) Stock Is Going Strong: Is the Market Following Fundamentals?

Most readers would already be aware that Waberer's International Nyrt's (BST:3WB) stock increased significantly by 12% over the past month. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Specifically, we decided to study Waberer's International Nyrt's ROE in this article.

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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Is ROE Calculated?

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 Waberer's International Nyrt is:

18% = €36m ÷ €201m (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. So, this means that for every €1 of its shareholder's investments, the company generates a profit of €0.18.

Check out our latest analysis for Waberer's International Nyrt

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.

Waberer's International Nyrt's Earnings Growth And 18% ROE

To start with, Waberer's International Nyrt's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 11%. This certainly adds some context to Waberer's International Nyrt's exceptional 56% net income growth seen over the past five years. However, there could also be other causes behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then compared Waberer's International Nyrt'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 32% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. 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. If you're wondering about Waberer's International Nyrt's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Waberer's International Nyrt Using Its Retained Earnings Effectively?

Waberer's International Nyrt's three-year median payout ratio to shareholders is 23%, which is quite low. This implies that the company is retaining 77% of its profits. So it looks like Waberer's International Nyrt is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Additionally, Waberer's International Nyrt has paid dividends over a period of three years which means that the company is pretty serious about sharing its profits with shareholders.

Summary

In total, we are pretty happy with Waberer's International Nyrt'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 substantial growth in its earnings.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.