KEPCO Plant Service & Engineering Co.,Ltd.'s (KRX:051600) Stock Is Going Strong: Is the Market Following Fundamentals?

KEPCO Plant Service & EngineeringLtd's (KRX:051600) stock is up by a considerable 17% over the past month. 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 KEPCO Plant Service & EngineeringLtd'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. 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 KEPCO Plant Service & EngineeringLtd is:

11% = ₩140b ÷ ₩1.2t (Based on the trailing twelve months to March 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 ₩0.11 in profit.

Check out our latest analysis for KEPCO Plant Service & EngineeringLtd

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. 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.

KEPCO Plant Service & EngineeringLtd's Earnings Growth And 11% ROE

At first glance, KEPCO Plant Service & EngineeringLtd seems to have a decent ROE. On comparing with the average industry ROE of 9.5% the company's ROE looks pretty remarkable. This probably laid the ground for KEPCO Plant Service & EngineeringLtd's moderate 8.4% net income growth seen over the past five years.

As a next step, we compared KEPCO Plant Service & EngineeringLtd'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 8.4% 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. Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for A051600? You can find out in our latest intrinsic value infographic research report.

Is KEPCO Plant Service & EngineeringLtd Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 60% (or a retention ratio of 40%) for KEPCO Plant Service & EngineeringLtd suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Moreover, KEPCO Plant Service & EngineeringLtd is determined to keep sharing its profits with shareholders which we infer from its long history of six years of paying a dividend. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 57% of its profits over the next three years. Accordingly, forecasts suggest that KEPCO Plant Service & EngineeringLtd's future ROE will be 13% which is again, similar to the current ROE.

Summary

Overall, we are quite pleased with KEPCO Plant Service & EngineeringLtd's performance. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that's probably a good sign. 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 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.