Are Strong Financial Prospects The Force That Is Driving The Momentum In Samyang Foods Co., Ltd.'s KRX:003230) Stock?

Samyang Foods' (KRX:003230) stock is up by a considerable 6.1% over the past month. 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 Samyang Foods' ROE.

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 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 Samyang Foods is:

32% = ₩317b ÷ ₩996b (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 ₩0.32 in profit.

See our latest analysis for Samyang Foods

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. 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.

Samyang Foods' Earnings Growth And 32% ROE

To begin with, Samyang Foods has a pretty high ROE which is interesting. Secondly, even when compared to the industry average of 5.7% the company's ROE is quite impressive. So, the substantial 39% net income growth seen by Samyang Foods over the past five years isn't overly surprising.

As a next step, we compared Samyang Foods' net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 7.5%.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. Is A003230 fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Samyang Foods Using Its Retained Earnings Effectively?

Samyang Foods has a really low three-year median payout ratio of 7.8%, meaning that it has the remaining 92% left over to reinvest into its business. So it looks like Samyang Foods is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Additionally, Samyang Foods has paid dividends over a period of six years which means that the company is pretty serious about sharing its profits with shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 6.6%. Accordingly, forecasts suggest that Samyang Foods' future ROE will be 36% which is again, similar to the current ROE.

Conclusion

Overall, we are quite pleased with Samyang Foods' performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. 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 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.