Is Neptis Spólka Akcyjna's (WSE:YAN) Recent Stock Performance Influenced By Its Fundamentals In Any Way?

Neptis Spólka Akcyjna's (WSE:YAN) stock is up by a considerable 24% 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 Neptis Spólka Akcyjna's ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

See our latest analysis for Neptis Spólka Akcyjna

How Is ROE Calculated?

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 Neptis Spólka Akcyjna is:

19% = zł1.1m ÷ zł5.6m (Based on the trailing twelve months to June 2024).

The 'return' is the income the business earned over the last year. That means that for every PLN1 worth of shareholders' equity, the company generated PLN0.19 in profit.

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.

Neptis Spólka Akcyjna's Earnings Growth And 19% ROE

To start with, Neptis Spólka Akcyjna's ROE looks acceptable. Especially when compared to the industry average of 13% the company's ROE looks pretty impressive. This probably laid the ground for Neptis Spólka Akcyjna's significant 33% net income growth seen over the past five years. However, there could also be other causes behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then compared Neptis Spólka Akcyjna'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 18% in the same 5-year period.

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. What is YAN worth today? The intrinsic value infographic in our free research report helps visualize whether YAN is currently mispriced by the market.

Is Neptis Spólka Akcyjna Efficiently Re-investing Its Profits?

Neptis Spólka Akcyjna has very a high three-year median payout ratio of 104% suggesting that the company's shareholders are getting paid from more than just the company's earnings. However, this hasn't hampered its ability to grow as we saw earlier. Although, it could be worth keeping an eye on the high payout ratio as that's a huge risk. You can see the 3 risks we have identified for Neptis Spólka Akcyjna by visiting our risks dashboard for free on our platform here.

While Neptis Spólka Akcyjna 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.

Summary

Overall, we feel that Neptis Spólka Akcyjna certainly does have some positive factors to consider. Namely, its high earnings growth, which was likely due to its high ROE. However, investors could have benefitted even more from the high ROE, had the company been reinvesting more of its earnings. As discussed earlier, the company is retaining hardly any of its profits. So far, we've only made a quick discussion around the company's earnings growth. You can do your own research on Neptis Spólka Akcyjna and see how it has performed in the past by looking at this FREE detailed graph 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.