Is Koncar - distributivni i specijalni transformatori d.d.'s (ZGSE:KODT) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Most readers would already be aware that Koncar - distributivni i specijalni transformatori d.d's (ZGSE:KODT) stock increased significantly by 70% over the past three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Koncar - distributivni i specijalni transformatori d.d'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. 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?

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 Koncar - distributivni i specijalni transformatori d.d is:

47% = €134m ÷ €285m (Based on the trailing twelve months to March 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every €1 of its shareholder's investments, the company generates a profit of €0.47.

Check out our latest analysis for Koncar - distributivni i specijalni transformatori d.d

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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. 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.

Koncar - distributivni i specijalni transformatori d.d's Earnings Growth And 47% ROE

To begin with, Koncar - distributivni i specijalni transformatori d.d has a pretty high ROE which is interesting. Additionally, the company's ROE is higher compared to the industry average of 13% which is quite remarkable. So, the substantial 56% net income growth seen by Koncar - distributivni i specijalni transformatori d.d over the past five years isn't overly surprising.

We then compared Koncar - distributivni i specijalni transformatori d.d'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 18% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is Koncar - distributivni i specijalni transformatori d.d fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Koncar - distributivni i specijalni transformatori d.d Efficiently Re-investing Its Profits?

The three-year median payout ratio for Koncar - distributivni i specijalni transformatori d.d is 30%, which is moderately low. The company is retaining the remaining 70%. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Koncar - distributivni i specijalni transformatori d.d is reinvesting its earnings efficiently.

Additionally, Koncar - distributivni i specijalni transformatori d.d has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders.

Summary

Overall, we are quite pleased with Koncar - distributivni i specijalni transformatori d.d's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings.

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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.