Declining Stock and Solid Fundamentals: Is The Market Wrong About C. E. Info Systems Limited (NSE:MAPMYINDIA)?

It is hard to get excited after looking at C. E. Info Systems' (NSE:MAPMYINDIA) recent performance, when its stock has declined 15% over the past month. 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 C. E. Info Systems' 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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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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 C. E. Info Systems is:

19% = ₹1.5b ÷ ₹7.9b (Based on the trailing twelve months to March 2025).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.19 in profit.

View our latest analysis for C. E. Info Systems

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.

C. E. Info Systems' Earnings Growth And 19% ROE

At first glance, C. E. Info Systems seems to have a decent ROE. Especially when compared to the industry average of 12% the company's ROE looks pretty impressive. This probably laid the ground for C. E. Info Systems' significant 22% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared C. E. Info Systems' net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 21% in the same period.

Earnings growth is an important metric to consider when valuing a stock. 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. If you're wondering about C. E. Info Systems''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is C. E. Info Systems Using Its Retained Earnings Effectively?

C. E. Info Systems has a really low three-year median payout ratio of 13%, meaning that it has the remaining 87% left over to reinvest into its business. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Moreover, C. E. Info Systems is determined to keep sharing its profits with shareholders which we infer from its long history of three years of paying a dividend. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 10%. Still, forecasts suggest that C. E. Info Systems' future ROE will rise to 25% even though the the company's payout ratio is not expected to change by much.

Conclusion

On the whole, we feel that C. E. Info Systems' performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. 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.