Konecranes Plc's (HEL:KCR) Stock Been Rising: Are Strong Financials Guiding The Market?

Konecranes' (HEL:KCR) stock up by 4.5% 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. Particularly, we will be paying attention to Konecranes' ROE today.

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.

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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 Konecranes is:

21% = €383m ÷ €1.8b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. That means that for every €1 worth of shareholders' equity, the company generated €0.21 in profit.

See our latest analysis for Konecranes

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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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.

Konecranes' Earnings Growth And 21% ROE

To begin with, Konecranes seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 20%. This certainly adds some context to Konecranes' exceptional 30% net income growth seen over the past five years. We reckon that there could also be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Konecranes' 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 20% in the same 5-year period.

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is KCR fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Konecranes Using Its Retained Earnings Effectively?

Konecranes' three-year median payout ratio is a pretty moderate 39%, meaning the company retains 61% of its income. So it seems that Konecranes is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Besides, Konecranes has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 37%. Accordingly, forecasts suggest that Konecranes' future ROE will be 18% which is again, similar to the current ROE.

Conclusion

Overall, we are quite pleased with Konecranes' 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. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. 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.