Are Strong Financial Prospects The Force That Is Driving The Momentum In National Atomic Company Kazatomprom JSC's LON:KAP) Stock?

National Atomic Company Kazatomprom JSC (LON:KAP) has had a great run on the share market with its stock up by a significant 31% over the last three months. 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 National Atomic Company Kazatomprom JSC's ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

Return on equity 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 National Atomic Company Kazatomprom JSC is:

27% = ₸782b ÷ ₸2.9t (Based on the trailing twelve months to March 2025).

The 'return' is the profit over the last twelve months. That means that for every $1 worth of shareholders' equity, the company generated $0.27 in profit.

View our latest analysis for National Atomic Company Kazatomprom JSC

Why Is ROE Important For 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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of National Atomic Company Kazatomprom JSC's Earnings Growth And 27% ROE

To begin with, National Atomic Company Kazatomprom JSC has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 9.7% also doesn't go unnoticed by us. Under the circumstances, National Atomic Company Kazatomprom JSC's considerable five year net income growth of 36% was to be expected.

We then compared National Atomic Company Kazatomprom JSC'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 21% 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. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if National Atomic Company Kazatomprom JSC is trading on a high P/E or a low P/E, relative to its industry.

Is National Atomic Company Kazatomprom JSC Making Efficient Use Of Its Profits?

National Atomic Company Kazatomprom JSC's significant three-year median payout ratio of 60% (where it is retaining only 40% of its income) suggests that the company has been able to achieve a high growth in earnings despite returning most of its income to shareholders.

Looking at the current analyst consensus data, we can see that the company's future payout ratio is expected to rise to 104% over the next three years. Regardless, the future ROE for National Atomic Company Kazatomprom JSC is speculated to rise to 33% despite the anticipated increase in the payout ratio. There could probably be other factors that could be driving the future growth in the ROE.

Summary

On the whole, we feel that National Atomic Company Kazatomprom JSC's performance has been quite good. 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. 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.