The Sandur Manganese & Iron Ores Limited's (NSE:SANDUMA) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Most readers would already be aware that Sandur Manganese & Iron Ores' (NSE:SANDUMA) stock increased significantly by 40% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Specifically, we decided to study Sandur Manganese & Iron Ores' ROE in this article.

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.

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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 Sandur Manganese & Iron Ores is:

19% = ₹4.9b ÷ ₹26b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. So, this means that for every ₹1 of its shareholder's investments, the company generates a profit of ₹0.19.

Check out our latest analysis for Sandur Manganese & Iron Ores

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Sandur Manganese & Iron Ores' Earnings Growth And 19% ROE

To start with, Sandur Manganese & Iron Ores' ROE looks acceptable. On comparing with the average industry ROE of 11% the company's ROE looks pretty remarkable. Probably as a result of this, Sandur Manganese & Iron Ores was able to see a decent growth of 12% over the last five years.

Next, on comparing with the industry net income growth, we found that Sandur Manganese & Iron Ores' reported growth was lower than the industry growth of 26% over the last few years, which is not something we like to see.

Earnings growth is a huge factor in stock valuation. 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. 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 Sandur Manganese & Iron Ores is trading on a high P/E or a low P/E, relative to its industry.

Is Sandur Manganese & Iron Ores Efficiently Re-investing Its Profits?

Sandur Manganese & Iron Ores has a low three-year median payout ratio of 4.3%, meaning that the company retains the remaining 96% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.

Additionally, Sandur Manganese & Iron Ores 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.

Summary

On the whole, we feel that Sandur Manganese & Iron Ores' performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. As a result, the decent growth in its earnings is not surprising. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Let's not forget, business risk is also one of the factors that affects the price of the stock. So this is also an important area that investors need to pay attention to before making a decision on any business. You can see the 3 risks we have identified for Sandur Manganese & Iron Ores by visiting our risks dashboard for free on our platform here.

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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.