Is Weakness In S&S Tech Corporation (KOSDAQ:101490) Stock A Sign That The Market Could be Wrong Given Its Strong Financial Prospects?

It is hard to get excited after looking at S&S Tech's (KOSDAQ:101490) recent performance, when its stock has declined 21% over the past month. However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. Specifically, we decided to study S&S Tech's ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for S&S Tech is:

15% = ₩41b ÷ ₩281b (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. Another way to think of that is that for every ₩1 worth of equity, the company was able to earn ₩0.15 in profit.

View our latest analysis for S&S Tech

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

S&S Tech's Earnings Growth And 15% ROE

To start with, S&S Tech's ROE looks acceptable. Especially when compared to the industry average of 8.0% the company's ROE looks pretty impressive. This probably laid the ground for S&S Tech's significant 29% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared S&S Tech's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 4.2% 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). 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 S&S Tech's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is S&S Tech Making Efficient Use Of Its Profits?

S&S Tech's ' three-year median payout ratio is on the lower side at 8.8% implying that it is retaining a higher percentage (91%) of its profits. So it looks like S&S Tech is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Additionally, S&S Tech has paid dividends over a period of five years which means that the company is pretty serious about sharing its profits with shareholders.

Summary

In total, we are pretty happy with S&S Tech's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. Our risks dashboard will have the 1 risk we have identified for S&S Tech.

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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.