Thangamayil Jewellery Limited's (NSE:THANGAMAYL) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Thangamayil Jewellery (NSE:THANGAMAYL) has had a great run on the share market with its stock up by a significant 53% over the last month. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on Thangamayil Jewellery's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

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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 Thangamayil Jewellery is:

16% = ₹1.8b ÷ ₹12b (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.16 in profit.

Check out our latest analysis for Thangamayil Jewellery

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.

A Side By Side comparison of Thangamayil Jewellery's Earnings Growth And 16% ROE

At first glance, Thangamayil Jewellery seems to have a decent ROE. On comparing with the average industry ROE of 12% the company's ROE looks pretty remarkable. This probably laid the ground for Thangamayil Jewellery's moderate 18% net income growth seen over the past five years.

We then compared Thangamayil Jewellery's net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 31% in the same 5-year period, which is a bit concerning.

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. This then helps them determine if the stock is placed for a bright or bleak future. Is Thangamayil Jewellery fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Thangamayil Jewellery Using Its Retained Earnings Effectively?

Thangamayil Jewellery has a low three-year median payout ratio of 21%, meaning that the company retains the remaining 79% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.

Additionally, Thangamayil Jewellery 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 is expected to keep paying out approximately 17% of its profits over the next three years. However, Thangamayil Jewellery's ROE is predicted to rise to 21% despite there being no anticipated change in its payout ratio.

Summary

Overall, we are quite pleased with Thangamayil Jewellery's performance. 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. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. 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.