HITEJINRO Co., Ltd. (KRX:000080) On An Uptrend: Could Fundamentals Be Driving The Stock?

Most readers would already know that HITEJINRO's (KRX:000080) stock increased by 6.2% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Specifically, we decided to study HITEJINRO'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. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

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 HITEJINRO is:

9.4% = ₩108b ÷ ₩1.1t (Based on the trailing twelve months to March 2025).

The 'return' is the yearly profit. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.09 in profit.

See our latest analysis for HITEJINRO

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. 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.

A Side By Side comparison of HITEJINRO's Earnings Growth And 9.4% ROE

On the face of it, HITEJINRO's ROE is not much to talk about. Although a closer study shows that the company's ROE is higher than the industry average of 7.5% which we definitely can't overlook. This probably goes some way in explaining HITEJINRO's moderate 5.6% growth over the past five years amongst other factors. Bear in mind, the company does have a moderately low ROE. It is just that the industry ROE is lower. So there might well be other reasons for the earnings to grow. Such as- high earnings retention or the company belonging to a high growth industry.

We then performed a comparison between HITEJINRO's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 5.6% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. If you're wondering about HITEJINRO's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is HITEJINRO Making Efficient Use Of Its Profits?

The high three-year median payout ratio of 76% (or a retention ratio of 24%) for HITEJINRO suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Additionally, HITEJINRO has paid dividends over a period of six years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to drop to 43% over the next three years. Despite the lower expected payout ratio, the company's ROE is not expected to change by much.

Summary

In total, it does look like HITEJINRO has some positive aspects to its business. Specifically, its respectable ROE which likely led to the considerable growth in earnings. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page 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.