Will Weakness in Atresmedia Corporación de Medios de Comunicación, S.A.'s (BME:A3M) Stock Prove Temporary Given Strong Fundamentals?

It is hard to get excited after looking at Atresmedia Corporación de Medios de Comunicación's (BME:A3M) recent performance, when its stock has declined 11% over the past three months. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. In this article, we decided to focus on Atresmedia Corporación de Medios de Comunicación's ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. 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 Atresmedia Corporación de Medios de Comunicación is:

15% = €115m ÷ €771m (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. That means that for every €1 worth of shareholders' equity, the company generated €0.15 in profit.

Check out our latest analysis for Atresmedia Corporación de Medios de Comunicación

What Has ROE Got To Do With 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.

A Side By Side comparison of Atresmedia Corporación de Medios de Comunicación's Earnings Growth And 15% ROE

At first glance, Atresmedia Corporación de Medios de Comunicación seems to have a decent ROE. On comparing with the average industry ROE of 11% the company's ROE looks pretty remarkable. This certainly adds some context to Atresmedia Corporación de Medios de Comunicación's decent 19% net income growth seen over the past five years.

Next, on comparing Atresmedia Corporación de Medios de Comunicación's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 16% over the last few years.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Is A3M fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Atresmedia Corporación de Medios de Comunicación Efficiently Re-investing Its Profits?

While Atresmedia Corporación de Medios de Comunicación has a three-year median payout ratio of 80% (which means it retains 20% of profits), the company has still seen a fair bit of earnings growth in the past, meaning that its high payout ratio hasn't hampered its ability to grow.

Moreover, Atresmedia Corporación de Medios de Comunicación is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. 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 86%. As a result, Atresmedia Corporación de Medios de Comunicación's ROE is not expected to change by much either, which we inferred from the analyst estimate of 13% for future ROE.

Summary

Overall, we are quite pleased with Atresmedia Corporación de Medios de Comunicación's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. With that said, on studying the latest analyst forecasts, we found that while the company has seen growth in its past earnings, analysts expect its future earnings to shrink. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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.