Bet Shemesh Engines Holdings (1997) Ltd's (TLV:BSEN) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Bet Shemesh Engines Holdings (1997)'s (TLV:BSEN) stock is up by a considerable 22% 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. In this article, we decided to focus on Bet Shemesh Engines Holdings (1997)'s ROE.

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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Is ROE Calculated?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Bet Shemesh Engines Holdings (1997) is:

18% = US$39m ÷ US$215m (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. So, this means that for every ₪1 of its shareholder's investments, the company generates a profit of ₪0.18.

See our latest analysis for Bet Shemesh Engines Holdings (1997)

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

Bet Shemesh Engines Holdings (1997)'s Earnings Growth And 18% ROE

At first glance, Bet Shemesh Engines Holdings (1997) seems to have a decent ROE. And on comparing with the industry, we found that the the average industry ROE is similar at 18%. This certainly adds some context to Bet Shemesh Engines Holdings (1997)'s exceptional 54% net income growth seen over the past five years. However, there could also be other drivers 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.

As a next step, we compared Bet Shemesh Engines Holdings (1997)'s net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 41%.

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. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Bet Shemesh Engines Holdings (1997)'s's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Bet Shemesh Engines Holdings (1997) Making Efficient Use Of Its Profits?

Bet Shemesh Engines Holdings (1997) has a significant three-year median payout ratio of 76%, meaning the company only retains 24% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.

Additionally, Bet Shemesh Engines Holdings (1997) 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.

Conclusion

On the whole, we feel that Bet Shemesh Engines Holdings (1997)'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. So far, we've only made a quick discussion around the company's earnings growth. So it may be worth checking this free detailed graph of Bet Shemesh Engines Holdings (1997)'s past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

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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.