Aprogen pharmaceuticals,Inc.'s (KRX:003060) Financials Are Too Obscure To Link With Current Share Price Momentum: What's In Store For the Stock?

Aprogen pharmaceuticalsInc's (KRX:003060) stock is up by 3.3% over the past three months. However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, as stock prices tend to be aligned with a company's long-term financial performance. Specifically, we decided to study Aprogen pharmaceuticalsInc'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 simpler terms, it measures the profitability of a company in relation to shareholder's equity.

View our latest analysis for Aprogen pharmaceuticalsInc

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 Aprogen pharmaceuticalsInc is:

3.5% = ₩21b ÷ ₩598b (Based on the trailing twelve months to September 2020).

The 'return' is the yearly profit. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.04 in profit.

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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 Aprogen pharmaceuticalsInc's Earnings Growth And 3.5% ROE

As you can see, Aprogen pharmaceuticalsInc's ROE looks pretty weak. Not just that, even compared to the industry average of 7.8%, the company's ROE is entirely unremarkable. Therefore, Aprogen pharmaceuticalsInc's flat earnings over the past five years can possibly be explained by the low ROE amongst other factors.

Next, on comparing with the industry net income growth, we found that Aprogen pharmaceuticalsInc's reported growth was lower than the industry growth of 14% in the same period, which is not something we like to see.

Earnings growth is an important metric to consider when valuing a stock. 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 Aprogen pharmaceuticalsInc's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Aprogen pharmaceuticalsInc Making Efficient Use Of Its Profits?

Conclusion

On the whole, we feel that the performance shown by Aprogen pharmaceuticalsInc can be open to many interpretations. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of Aprogen pharmaceuticalsInc's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

If you’re looking to trade Aprogen pharmaceuticalsInc, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.