Is LTIMindtree Limited's (NSE:LTIM) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

LTIMindtree's (NSE:LTIM) stock is up by a considerable 10% over the past 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 LTIMindtree's ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for LTIMindtree is:

21% = ₹49b ÷ ₹234b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₹1 of shareholders' capital it has, the company made ₹0.21 in profit.

Check out our latest analysis for LTIMindtree

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 LTIMindtree's Earnings Growth And 21% ROE

At first glance, LTIMindtree seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 16%. This probably laid the ground for LTIMindtree's significant 20% net income growth seen over the past five years. However, there could also be other causes behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

Next, on comparing with the industry net income growth, we found that LTIMindtree's 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. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is LTIMindtree fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is LTIMindtree Using Its Retained Earnings Effectively?

The three-year median payout ratio for LTIMindtree is 41%, which is moderately low. The company is retaining the remaining 59%. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like LTIMindtree is reinvesting its earnings efficiently.

Besides, LTIMindtree has been paying dividends over a period of nine years. This shows that the company is committed to sharing profits with its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 39%. As a result, LTIMindtree's ROE is not expected to change by much either, which we inferred from the analyst estimate of 22% for future ROE.

Conclusion

Overall, we are quite pleased with LTIMindtree's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a respectable growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page 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.