Topco Media Co.,Ltd.'s (KOSDAQ:134580) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Most readers would already be aware that Topco MediaLtd's (KOSDAQ:134580) stock increased significantly by 15% over the past week. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. Specifically, we decided to study Topco MediaLtd'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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Do You Calculate Return On Equity?

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 Topco MediaLtd is:

1.0% = ₩355m ÷ ₩37b (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. So, this means that for every ₩1 of its shareholder's investments, the company generates a profit of ₩0.01.

Check out our latest analysis for Topco MediaLtd

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 Topco MediaLtd's Earnings Growth And 1.0% ROE

As you can see, Topco MediaLtd's ROE looks pretty weak. Even when compared to the industry average of 7.4%, the ROE figure is pretty disappointing. As a result, Topco MediaLtd's flat earnings over the past five years doesn't come as a surprise given its lower ROE.

As a next step, we compared Topco MediaLtd's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 1.3% in the same period.

Earnings growth is an important metric to consider when valuing a stock. 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. 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 Topco MediaLtd is trading on a high P/E or a low P/E, relative to its industry.

Is Topco MediaLtd Efficiently Re-investing Its Profits?

Topco MediaLtd doesn't pay any regular dividends, meaning that the company is keeping all of its profits, which makes us wonder why it is retaining its earnings if it can't use them to grow its business. It looks like there might be some other reasons to explain the lack in that respect. For example, the business could be in decline.

Summary

In total, it does look like Topco MediaLtd has some positive aspects to its business. Namely, its respectable earnings growth, which it achieved due to it retaining most of its profits. However, given the low ROE, investors may not be benefitting from all that reinvestment after all. So far, we've only made a quick discussion around the company's earnings growth. To gain further insights into Topco MediaLtd's past profit growth, check out this visualization of past earnings, revenue and cash flows.

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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.