Is Weakness In Ecos (India) Mobility & Hospitality Limited (NSE:ECOSMOBLTY) Stock A Sign That The Market Could be Wrong Given Its Strong Financial Prospects?

It is hard to get excited after looking at Ecos (India) Mobility & Hospitality's (NSE:ECOSMOBLTY) recent performance, when its stock has declined 16% over the past three months. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Ecos (India) Mobility & Hospitality's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To Calculate Return On Equity?

ROE 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 Ecos (India) Mobility & Hospitality is:

27% = ₹599m ÷ ₹2.2b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. So, this means that for every ₹1 of its shareholder's investments, the company generates a profit of ₹0.27.

See our latest analysis for Ecos (India) Mobility & Hospitality

What Is The Relationship Between ROE And 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. 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.

A Side By Side comparison of Ecos (India) Mobility & Hospitality's Earnings Growth And 27% ROE

To begin with, Ecos (India) Mobility & Hospitality has a pretty high ROE which is interesting. Additionally, the company's ROE is higher compared to the industry average of 13% which is quite remarkable. As a result, Ecos (India) Mobility & Hospitality's exceptional 33% net income growth seen over the past five years, doesn't come as a surprise.

Next, on comparing Ecos (India) Mobility & Hospitality's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 32% over the last few years.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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 Ecos (India) Mobility & Hospitality fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Ecos (India) Mobility & Hospitality Making Efficient Use Of Its Profits?

Ecos (India) Mobility & Hospitality's three-year median payout ratio to shareholders is 24%, which is quite low. This implies that the company is retaining 76% of its profits. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 23% of its profits over the next three years. As a result, Ecos (India) Mobility & Hospitality's ROE is not expected to change by much either, which we inferred from the analyst estimate of 27% for future ROE.

Conclusion

Overall, we are quite pleased with Ecos (India) Mobility & Hospitality's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial 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.