HD-Hyundai Marine Engine Co., Ltd.'s (KRX:071970) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Most readers would already be aware that HD-Hyundai Marine Engine's (KRX:071970) stock increased significantly by 72% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study HD-Hyundai Marine Engine's ROE in this article.

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?

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 HD-Hyundai Marine Engine is:

25% = ₩90b ÷ ₩357b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.25 in profit.

Check out our latest analysis for HD-Hyundai Marine Engine

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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 HD-Hyundai Marine Engine's Earnings Growth And 25% ROE

First thing first, we like that HD-Hyundai Marine Engine has an impressive ROE. Secondly, even when compared to the industry average of 5.9% the company's ROE is quite impressive. So, the substantial 71% net income growth seen by HD-Hyundai Marine Engine over the past five years isn't overly surprising.

Next, on comparing with the industry net income growth, we found that HD-Hyundai Marine Engine's growth is quite high when compared to the industry average growth of 19% in the same period, which is great to see.

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 HD-Hyundai Marine Engine's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is HD-Hyundai Marine Engine Efficiently Re-investing Its Profits?

Given that HD-Hyundai Marine Engine doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Conclusion

Overall, we are quite pleased with HD-Hyundai Marine Engine's performance. 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. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. 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.