Is SAMWHA CAPACITOR Co.,LTD's (KRX:001820) Stock's Recent Performance A Reflection Of Its Financial Health?

SAMWHA CAPACITORLTD's (KRX:001820) stock is up by 3.5% over the past month. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. In this article, we decided to focus on SAMWHA CAPACITORLTD's ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

Check out our latest analysis for SAMWHA CAPACITORLTD

How Do You 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 SAMWHA CAPACITORLTD is:

12% = ₩21b ÷ ₩172b (Based on the trailing twelve months to September 2020).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every ₩1 worth of equity, the company was able to earn ₩0.12 in profit.

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. 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.

SAMWHA CAPACITORLTD's Earnings Growth And 12% ROE

To begin with, SAMWHA CAPACITORLTD seems to have a respectable ROE. Especially when compared to the industry average of 5.3% the company's ROE looks pretty impressive. Probably as a result of this, SAMWHA CAPACITORLTD was able to see an impressive net income growth of 36% over the last five years. However, there could also be other causes behind this growth. Such as - high earnings retention or an efficient management in place.

We then compared SAMWHA CAPACITORLTD'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 2.3% in the same period.

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. Doing so will help them establish if the stock's future looks promising or ominous. What is A001820 worth today? The intrinsic value infographic in our free research report helps visualize whether A001820 is currently mispriced by the market.

Is SAMWHA CAPACITORLTD Making Efficient Use Of Its Profits?

SAMWHA CAPACITORLTD has a really low three-year median payout ratio of 12%, meaning that it has the remaining 88% left over to reinvest into its business. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

While SAMWHA CAPACITORLTD has seen growth in its earnings, it only recently started to pay a dividend. It is most likely that the company decided to impress new and existing shareholders with a dividend. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 10% of its profits over the next three years. However, SAMWHA CAPACITORLTD's ROE is predicted to rise to 18% despite there being no anticipated change in its payout ratio.

Summary

In total, we are pretty happy with SAMWHA CAPACITORLTD's performance. 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, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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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.
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