Are Robust Financials Driving The Recent Rally In HD HYUNDAI Marine Solution CO.,LTD.'s (KRX:443060) Stock?

HD HYUNDAI Marine SolutionLTD (KRX:443060) has had a great run on the share market with its stock up by a significant 33% over the last three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. In this article, we decided to focus on HD HYUNDAI Marine SolutionLTD's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

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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 HD HYUNDAI Marine SolutionLTD is:

33% = ₩243b ÷ ₩728b (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.33 in profit.

Check out our latest analysis for HD HYUNDAI Marine SolutionLTD

What Has ROE Got To Do With 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. 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 SolutionLTD's Earnings Growth And 33% ROE

Firstly, we acknowledge that HD HYUNDAI Marine SolutionLTD has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 5.9% which is quite remarkable. So, the substantial 21% net income growth seen by HD HYUNDAI Marine SolutionLTD over the past five years isn't overly surprising.

As a next step, we compared HD HYUNDAI Marine SolutionLTD's 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 19% in the same period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. 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 SolutionLTD's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is HD HYUNDAI Marine SolutionLTD Using Its Retained Earnings Effectively?

HD HYUNDAI Marine SolutionLTD has a significant three-year median payout ratio of 64%, meaning the company only retains 36% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.

Along with seeing a growth in earnings, HD HYUNDAI Marine SolutionLTD only recently started paying dividends. Its quite possible that the company was looking to impress its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 64%. Still, forecasts suggest that HD HYUNDAI Marine SolutionLTD's future ROE will rise to 43% even though the the company's payout ratio is not expected to change by much.

Summary

In total, we are pretty happy with HD HYUNDAI Marine SolutionLTD's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. 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.