Is Cyber_Folks S.A.'s (WSE:CBF) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Cyber_Folks (WSE:CBF) has had a great run on the share market with its stock up by a significant 12% over the last week. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Particularly, we will be paying attention to Cyber_Folks' ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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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 Cyber_Folks is:

28% = zł154m ÷ zł547m (Based on the trailing twelve months to December 2024).

The 'return' is the income the business earned over the last year. So, this means that for every PLN1 of its shareholder's investments, the company generates a profit of PLN0.28.

See our latest analysis for Cyber_Folks

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. 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. 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.

A Side By Side comparison of Cyber_Folks' Earnings Growth And 28% ROE

To begin with, Cyber_Folks has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 13% also doesn't go unnoticed by us. Under the circumstances, Cyber_Folks' considerable five year net income growth of 39% was to be expected.

Next, on comparing with the industry net income growth, we found that Cyber_Folks' growth is quite high when compared to the industry average growth of 0.4% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. 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. Is Cyber_Folks fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Cyber_Folks Efficiently Re-investing Its Profits?

Cyber_Folks' three-year median payout ratio is a pretty moderate 43%, meaning the company retains 57% of its income. So it seems that Cyber_Folks is reinvesting efficiently in a way that it sees impressive growth in its earnings (discussed above) and pays a dividend that's well covered.

Besides, Cyber_Folks has been paying dividends over a period of six years. This shows that the company is committed to sharing profits with its shareholders.

Conclusion

On the whole, we feel that Cyber_Folks' performance has been quite good. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.