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

Most readers would already know that Rami Levi Chain Stores Hashikma Marketing 2006's (TLV:RMLI) stock increased by 5.0% over the past week. 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. Particularly, we will be paying attention to Rami Levi Chain Stores Hashikma Marketing 2006's ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. 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 Rami Levi Chain Stores Hashikma Marketing 2006 is:

39% = ₪244m ÷ ₪622m (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each ₪1 of shareholders' capital it has, the company made ₪0.39 in profit.

View our latest analysis for Rami Levi Chain Stores Hashikma Marketing 2006

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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 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.

Rami Levi Chain Stores Hashikma Marketing 2006's Earnings Growth And 39% ROE

Firstly, we acknowledge that Rami Levi Chain Stores Hashikma Marketing 2006 has a significantly high ROE. Secondly, even when compared to the industry average of 15% the company's ROE is quite impressive. This likely paved the way for the modest 7.4% net income growth seen by Rami Levi Chain Stores Hashikma Marketing 2006 over the past five years.

As a next step, we compared Rami Levi Chain Stores Hashikma Marketing 2006's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 6.5% in the same period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. 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 Rami Levi Chain Stores Hashikma Marketing 2006 is trading on a high P/E or a low P/E, relative to its industry.

Is Rami Levi Chain Stores Hashikma Marketing 2006 Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 99% (or a retention ratio of 0.7%) for Rami Levi Chain Stores Hashikma Marketing 2006 suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

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. Especially the growth in earnings which was backed by an impressive ROE. Still, the high ROE could have been even more beneficial to investors had the company been reinvesting more of its profits. As highlighted earlier, the current reinvestment rate appears to be negligible. 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.