Tigbur - Temporary Professional Personnel Ltd.'s (TLV:TIGBUR) Stock Has Seen Strong Momentum: Does That Call For Deeper Study Of Its Financial Prospects?

Tigbur - Temporary Professional Personnel's (TLV:TIGBUR) stock is up by a considerable 33% over the past month. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Tigbur - Temporary Professional Personnel's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

Check out our latest analysis for Tigbur - Temporary Professional Personnel

How To Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for Tigbur - Temporary Professional Personnel is:

4.5% = ₪4.2m ÷ ₪92m (Based on the trailing twelve months to June 2020).

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 ₪0.05 in profit.

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.

Tigbur - Temporary Professional Personnel's Earnings Growth And 4.5% ROE

On the face of it, Tigbur - Temporary Professional Personnel's ROE is not much to talk about. Next, when compared to the average industry ROE of 12%, the company's ROE leaves us feeling even less enthusiastic. However, the moderate 5.2% net income growth seen by Tigbur - Temporary Professional Personnel over the past five years is definitely a positive. So, there might be other aspects that are positively influencing the company's earnings 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.

Next, on comparing with the industry net income growth, we found that Tigbur - Temporary Professional Personnel's reported growth was lower than the industry growth of 13% in the same period, which is not something we like to see.

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. If you're wondering about Tigbur - Temporary Professional Personnel's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Tigbur - Temporary Professional Personnel Efficiently Re-investing Its Profits?

Tigbur - Temporary Professional Personnel has a healthy combination of a moderate three-year median payout ratio of 47% (or a retention ratio of 53%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits.

Besides, Tigbur - Temporary Professional Personnel has been paying dividends over a period of seven years. This shows that the company is committed to sharing profits with its shareholders.

Summary

Overall, we feel that Tigbur - Temporary Professional Personnel certainly does have some positive factors to consider. Specifically, its fairly high earnings growth number, which no doubt was backed by the company's high earnings retention. Still, the low ROE means that all that reinvestment is not reaping a lot of benefit to the investors. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. Our risks dashboard would have the 5 risks we have identified for Tigbur - Temporary Professional Personnel.

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This article by Simply Wall St is general in nature. 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.
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