Is HYUNDAI MOVEX Co., Ltd.'s (KOSDAQ:319400) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

HYUNDAI MOVEX's (KOSDAQ:319400) stock is up by a considerable 25% over the past three months. 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 HYUNDAI MOVEX's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. 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 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 HYUNDAI MOVEX is:

15% = ₩22b ÷ ₩149b (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 ₩0.15 in profit.

View our latest analysis for HYUNDAI MOVEX

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. 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 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.

HYUNDAI MOVEX's Earnings Growth And 15% ROE

To begin with, HYUNDAI MOVEX seems to have a respectable ROE. On comparing with the average industry ROE of 6.6% the company's ROE looks pretty remarkable. This certainly adds some context to HYUNDAI MOVEX's exceptional 24% net income growth seen over the past five years. We reckon that there could also be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared HYUNDAI MOVEX'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 4.9% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is A319400 fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is HYUNDAI MOVEX Using Its Retained Earnings Effectively?

HYUNDAI MOVEX's three-year median payout ratio is a pretty moderate 32%, meaning the company retains 68% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like HYUNDAI MOVEX is reinvesting its earnings efficiently.

Moreover, HYUNDAI MOVEX is determined to keep sharing its profits with shareholders which we infer from its long history of three years of paying a dividend.

Summary

Overall, we are quite pleased with HYUNDAI MOVEX'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 sizeable growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. 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.