Is Eugene Technology Co.,Ltd.'s (KOSDAQ:084370) Latest Stock Performance A Reflection Of Its Financial Health?

Eugene TechnologyLtd (KOSDAQ:084370) has had a great run on the share market with its stock up by a significant 61% over the last three months. 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 Eugene TechnologyLtd's ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Is ROE Calculated?

Return on equity 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 Eugene TechnologyLtd is:

14% = ₩66b ÷ ₩455b (Based on the trailing twelve months to June 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every ₩1 of its shareholder's investments, the company generates a profit of ₩0.14.

See our latest analysis for Eugene TechnologyLtd

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.

Eugene TechnologyLtd's Earnings Growth And 14% ROE

To begin with, Eugene TechnologyLtd seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 7.9%. This certainly adds some context to Eugene TechnologyLtd's decent 19% net income growth seen over the past five years.

Next, on comparing with the industry net income growth, we found that Eugene TechnologyLtd's growth is quite high when compared to the industry average growth of 4.5% in the same period, which is great to see.

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. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Eugene TechnologyLtd is trading on a high P/E or a low P/E, relative to its industry.

Is Eugene TechnologyLtd Making Efficient Use Of Its Profits?

Eugene TechnologyLtd has a low three-year median payout ratio of 8.1%, meaning that the company retains the remaining 92% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.

Additionally, Eugene TechnologyLtd has paid dividends over a period of at least ten 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 is expected to keep paying out approximately 7.3% of its profits over the next three years. However, Eugene TechnologyLtd's ROE is predicted to rise to 19% despite there being no anticipated change in its payout ratio.

Summary

On the whole, we feel that Eugene TechnologyLtd's performance has been quite good. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. That being so, the latest analyst forecasts show that the company will continue to see an expansion in its earnings. 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.