Do Its Financials Have Any Role To Play In Driving Ingersoll-Rand (India) Limited's (NSE:INGERRAND) Stock Up Recently?

Ingersoll-Rand (India) (NSE:INGERRAND) has had a great run on the share market with its stock up by a significant 8.8% over the last 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. Particularly, we will be paying attention to Ingersoll-Rand (India)'s ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

ROE 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 Ingersoll-Rand (India) is:

43% = ₹2.6b ÷ ₹6.1b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.43 in profit.

Check out our latest analysis for Ingersoll-Rand (India)

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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.

Ingersoll-Rand (India)'s Earnings Growth And 43% ROE

To begin with, Ingersoll-Rand (India) has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 14% also doesn't go unnoticed by us. Under the circumstances, Ingersoll-Rand (India)'s considerable five year net income growth of 29% was to be expected.

We then performed a comparison between Ingersoll-Rand (India)'s net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 27% 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. 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 Ingersoll-Rand (India)'s's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Ingersoll-Rand (India) Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 98% (implying that it keeps only 2.1% of profits) for Ingersoll-Rand (India) suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Moreover, Ingersoll-Rand (India) 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.

Summary

On the whole, we do feel that Ingersoll-Rand (India) has some positive attributes. 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. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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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.