Are Strong Financial Prospects The Force That Is Driving The Momentum In 99 Speed Mart Retail Holdings Berhad's KLSE:99SMART) Stock?

Most readers would already be aware that 99 Speed Mart Retail Holdings Berhad's (KLSE:99SMART) stock increased significantly by 29% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. In this article, we decided to focus on 99 Speed Mart Retail Holdings Berhad'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. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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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 99 Speed Mart Retail Holdings Berhad is:

31% = RM528m ÷ RM1.7b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. One way to conceptualize this is that for each MYR1 of shareholders' capital it has, the company made MYR0.31 in profit.

See our latest analysis for 99 Speed Mart Retail Holdings Berhad

What Has ROE Got To Do With 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. 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.

99 Speed Mart Retail Holdings Berhad's Earnings Growth And 31% ROE

Firstly, we acknowledge that 99 Speed Mart Retail Holdings Berhad has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 9.4% which is quite remarkable. Probably as a result of this, 99 Speed Mart Retail Holdings Berhad was able to see a decent net income growth of 11% over the last five years.

Next, on comparing 99 Speed Mart Retail Holdings Berhad's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 9.6% over the last few years.

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). This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about 99 Speed Mart Retail Holdings Berhad's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is 99 Speed Mart Retail Holdings Berhad Making Efficient Use Of Its Profits?

99 Speed Mart Retail Holdings Berhad has a healthy combination of a moderate three-year median payout ratio of 37% (or a retention ratio of 63%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits.

Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 56% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Summary

Overall, we are quite pleased with 99 Speed Mart Retail Holdings Berhad'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, the latest analyst forecasts show that the company will continue to see an expansion in its earnings. 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. 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.