Japan Elevator Service Holdings Co.,Ltd.'s (TSE:6544) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Japan Elevator Service HoldingsLtd (TSE:6544) has had a great run on the share market with its stock up by a significant 9.2% 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. Particularly, we will be paying attention to Japan Elevator Service HoldingsLtd's ROE today.

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 Japan Elevator Service HoldingsLtd is:

29% = JP¥5.4b ÷ JP¥19b (Based on the trailing twelve months to December 2024).

The 'return' is the yearly profit. So, this means that for every ¥1 of its shareholder's investments, the company generates a profit of ¥0.29.

Check out our latest analysis for Japan Elevator Service HoldingsLtd

What Is The Relationship Between ROE And 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. 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.

Japan Elevator Service HoldingsLtd's Earnings Growth And 29% ROE

First thing first, we like that Japan Elevator Service HoldingsLtd has an impressive ROE. Secondly, even when compared to the industry average of 9.1% the company's ROE is quite impressive. Under the circumstances, Japan Elevator Service HoldingsLtd's considerable five year net income growth of 22% was to be expected.

We then compared Japan Elevator Service HoldingsLtd's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 13% in the same 5-year period.

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). Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for 6544? You can find out in our latest intrinsic value infographic research report.

Is Japan Elevator Service HoldingsLtd Efficiently Re-investing Its Profits?

Japan Elevator Service HoldingsLtd's three-year median payout ratio is a pretty moderate 44%, meaning the company retains 56% of its income. By the looks of it, the dividend is well covered and Japan Elevator Service HoldingsLtd is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.

Moreover, Japan Elevator Service HoldingsLtd is determined to keep sharing its profits with shareholders which we infer from its long history of eight years of paying a dividend.

Summary

On the whole, we feel that Japan Elevator Service HoldingsLtd's 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. We also studied the latest analyst forecasts and found that the company's earnings growth is expected be similar to its current growth rate. 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.