Are Usha Martin Education & Solutions Limited's (NSE:UMESLTD) Fundamentals Good Enough to Warrant Buying Given The Stock's Recent Weakness?

It is hard to get excited after looking at Usha Martin Education & Solutions' (NSE:UMESLTD) recent performance, when its stock has declined 12% over the past week. However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. Particularly, we will be paying attention to Usha Martin Education & Solutions' 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 simpler terms, it measures the profitability of a company in relation to shareholder's equity.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Is ROE Calculated?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Usha Martin Education & Solutions is:

2.2% = ₹3.2m ÷ ₹146m (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 ₹0.02 in profit.

See our latest analysis for Usha Martin Education & Solutions

What Has ROE Got To Do With Earnings Growth?

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

Usha Martin Education & Solutions' Earnings Growth And 2.2% ROE

As you can see, Usha Martin Education & Solutions' ROE looks pretty weak. Not just that, even compared to the industry average of 13%, the company's ROE is entirely unremarkable. In spite of this, Usha Martin Education & Solutions was able to grow its net income considerably, at a rate of 45% in the last five years. We believe that there might be other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

We then performed a comparison between Usha Martin Education & Solutions' net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 39% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. Is Usha Martin Education & Solutions fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Usha Martin Education & Solutions Making Efficient Use Of Its Profits?

Given that Usha Martin Education & Solutions doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Conclusion

Overall, we feel that Usha Martin Education & Solutions certainly does have some positive factors to consider. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. 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. You can see the 2 risks we have identified for Usha Martin Education & Solutions by visiting our risks dashboard for free on our platform here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.