Is Polskie Towarzystwo Wspierania Przedsiebiorczosci S.A.'s (WSE:PTW) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Polskie Towarzystwo Wspierania Przedsiebiorczosci's (WSE:PTW) stock is up by a considerable 10% over the past week. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Polskie Towarzystwo Wspierania Przedsiebiorczosci'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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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:

18% = zł4.8m ÷ zł26m (Based on the trailing twelve months to December 2023).

The 'return' is the amount earned after tax over the last twelve months. That means that for every PLN1 worth of shareholders' equity, the company generated PLN0.18 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 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 18% ROE

To begin with, Polskie Towarzystwo Wspierania Przedsiebiorczosci seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 17%. This certainly adds some context to Polskie Towarzystwo Wspierania Przedsiebiorczosci's moderate 16% net income growth seen over the past five years.

Next, on comparing Polskie Towarzystwo Wspierania Przedsiebiorczosci's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 20% over the last few years.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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 Making Efficient Use Of Its Profits?

Polskie Towarzystwo Wspierania Przedsiebiorczosci has a significant three-year median payout ratio of 54%, meaning that it is left with only 46% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.

Besides, Polskie Towarzystwo Wspierania Przedsiebiorczosci has been paying dividends over a period of nine years. This shows that the company is committed to sharing profits with its shareholders.

Summary

Overall, we are quite pleased with Polskie Towarzystwo Wspierania Przedsiebiorczosci's performance. In particular, its high ROE is quite noteworthy and also the probable explanation behind its considerable earnings growth. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. So far, we've only made a quick discussion around the company's earnings growth. So it may be worth checking this free detailed graph of Polskie Towarzystwo Wspierania Przedsiebiorczosci's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

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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.