Stock Analysis

Could The Market Be Wrong About Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A. (WSE:PTW) Given Its Attractive Financial Prospects?

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WSE:PTW
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With its stock down 17% over the past three months, it is easy to disregard Polskie Towarzystwo Wspierania Przedsiebiorczosci (WSE:PTW). However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Particularly, we will be paying attention to Polskie Towarzystwo Wspierania Przedsiebiorczosci's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.

See our latest analysis for Polskie Towarzystwo Wspierania Przedsiebiorczosci

How Is ROE Calculated?

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 Polskie Towarzystwo Wspierania Przedsiebiorczosci is:

57% = zł14m ÷ zł25m (Based on the trailing twelve months to June 2022).

The 'return' is the profit over the last twelve months. That means that for every PLN1 worth of shareholders' equity, the company generated PLN0.57 in profit.

What Is The Relationship Between ROE And Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Polskie Towarzystwo Wspierania Przedsiebiorczosci's Earnings Growth And 57% ROE

Firstly, we acknowledge that Polskie Towarzystwo Wspierania Przedsiebiorczosci has a significantly high ROE. Second, a comparison with the average ROE reported by the industry of 26% also doesn't go unnoticed by us. Under the circumstances, Polskie Towarzystwo Wspierania Przedsiebiorczosci's considerable five year net income growth of 28% was to be expected.

Next, on comparing with the industry net income growth, we found that Polskie Towarzystwo Wspierania Przedsiebiorczosci's growth is quite high when compared to the industry average growth of 18% in the same period, which is great to see.

past-earnings-growth
WSE:PTW Past Earnings Growth October 5th 2022

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Polskie Towarzystwo Wspierania Przedsiebiorczosci fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Polskie Towarzystwo Wspierania Przedsiebiorczosci Using Its Retained Earnings Effectively?

Polskie Towarzystwo Wspierania Przedsiebiorczosci's three-year median payout ratio to shareholders is 14%, which is quite low. This implies that the company is retaining 86% of its profits. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Moreover, Polskie Towarzystwo Wspierania Przedsiebiorczosci is determined to keep sharing its profits with shareholders which we infer from its long history of eight years of paying a dividend.

Conclusion

On the whole, we feel that Polskie Towarzystwo Wspierania Przedsiebiorczosci'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. 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 would have the 4 risks we have identified for Polskie Towarzystwo Wspierania Przedsiebiorczosci.

Valuation is complex, but we're helping make it simple.

Find out whether Polskie Towarzystwo Wspierania Przedsiebiorczosci is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About WSE:PTW

Polskie Towarzystwo Wspierania Przedsiebiorczosci

Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth0
Past Performance4
Financial Health6
Dividends4

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet, good value and pays a dividend.