Stock Analysis

Will Weakness in Jindal Saw Limited's (NSE:JINDALSAW) Stock Prove Temporary Given Strong Fundamentals?

NSEI:JINDALSAW
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With its stock down 10% over the past month, it is easy to disregard Jindal Saw (NSE:JINDALSAW). However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Jindal Saw's ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

The formula for ROE is:

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

So, based on the above formula, the ROE for Jindal Saw is:

13% = ₹15b ÷ ₹110b (Based on the trailing twelve months to March 2025).

The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each ₹1 of shareholders' capital it has, the company made ₹0.13 in profit.

View our latest analysis for Jindal Saw

Why Is ROE Important For 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.

A Side By Side comparison of Jindal Saw's Earnings Growth And 13% ROE

At first glance, Jindal Saw's ROE doesn't look very promising. Although a closer study shows that the company's ROE is higher than the industry average of 11% which we definitely can't overlook. Particularly, the substantial 42% net income growth seen by Jindal Saw over the past five years is impressive . That being said, the company does have a slightly low ROE to begin with, just that it is higher than the industry average. Hence, there might be some other aspects that are causing earnings to grow. E.g the company has a low payout ratio or could belong to a high growth industry.

Next, on comparing with the industry net income growth, we found that Jindal Saw's growth is quite high when compared to the industry average growth of 26% in the same period, which is great to see.

past-earnings-growth
NSEI:JINDALSAW Past Earnings Growth July 12th 2025

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 JINDALSAW fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Jindal Saw Making Efficient Use Of Its Profits?

Jindal Saw has a really low three-year median payout ratio of 11%, meaning that it has the remaining 89% left over to reinvest into its business. So it seems like the management is reinvesting profits heavily to grow its business and this reflects in its earnings growth number.

Additionally, Jindal Saw has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 14% over the next three years. Regardless, the ROE is not expected to change much for the company despite the higher expected payout ratio.

Summary

Overall, we are quite pleased with Jindal Saw's performance. Specifically, we like that it has been reinvesting a high portion of its profits at a moderate rate of return, resulting in earnings expansion. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.