Do Fundamentals Have Any Role To Play In Driving Rami Levi Chain Stores Hashikma Marketing 2006 Ltd's (TLV:RMLI) Stock Up Recently?

Rami Levi Chain Stores Hashikma Marketing 2006's (TLV:RMLI) stock up by 6.8% over the past three months. As most would know, long-term fundamentals have a strong correlation with market price movements, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study Rami Levi Chain Stores Hashikma Marketing 2006'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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

Check out our latest analysis for Rami Levi Chain Stores Hashikma Marketing 2006

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 Rami Levi Chain Stores Hashikma Marketing 2006 is:

40% = ₪255m ÷ ₪634m (Based on the trailing twelve months to September 2024).

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 ₪0.40 in profit.

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. 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.

Rami Levi Chain Stores Hashikma Marketing 2006's Earnings Growth And 40% ROE

Firstly, we acknowledge that Rami Levi Chain Stores Hashikma Marketing 2006 has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 15% which is quite remarkable. Probably as a result of this, Rami Levi Chain Stores Hashikma Marketing 2006 was able to see a decent net income growth of 10% over the last five years.

We then compared Rami Levi Chain Stores Hashikma Marketing 2006'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 3.1% 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. Doing so will help them establish if the stock's future looks promising or ominous. Is Rami Levi Chain Stores Hashikma Marketing 2006 fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Rami Levi Chain Stores Hashikma Marketing 2006 Making Efficient Use Of Its Profits?

While Rami Levi Chain Stores Hashikma Marketing 2006 has a three-year median payout ratio of 99% (which means it retains 1.1% of profits), the company has still seen a fair bit of earnings growth in the past, meaning that its high payout ratio hasn't hampered its ability to grow.

Moreover, Rami Levi Chain Stores Hashikma Marketing 2006 is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.

Conclusion

In total, it does look like Rami Levi Chain Stores Hashikma Marketing 2006 has some positive aspects to its business. Specifically, its high ROE which likely led to the growth in earnings. Bear in mind, the company reinvests little to none of its profits, which means that investors aren't necessarily reaping the full benefits of the high rate of return. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. You can do your own research on Rami Levi Chain Stores Hashikma Marketing 2006 and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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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.