Can Mixed Fundamentals Have A Negative Impact on S.C. Moldova S.A. (BVB:MODY) Current Share Price Momentum?

Most readers would already be aware that S.C. Moldova's (BVB:MODY) stock increased significantly by 30% over the past week. However, we decided to pay attention to the company's fundamentals which don't appear to give a clear sign about the company's financial health. Specifically, we decided to study S.C. Moldova'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. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Is ROE Calculated?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for S.C. Moldova is:

7.2% = RON338k ÷ RON4.7m (Based on the trailing twelve months to March 2025).

The 'return' is the income the business earned over the last year. That means that for every RON1 worth of shareholders' equity, the company generated RON0.07 in profit.

Check out our latest analysis for S.C. Moldova

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

S.C. Moldova's Earnings Growth And 7.2% ROE

It is quite clear that S.C. Moldova's ROE is rather low. Even when compared to the industry average of 11%, the ROE figure is pretty disappointing. Although, we can see that S.C. Moldova saw a modest net income growth of 14% over the past five years. We reckon that there could be other factors at play here. Such as - high earnings retention or an efficient management in place.

We then performed a comparison between S.C. Moldova's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 15% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for MODY? You can find out in our latest intrinsic value infographic research report

Is S.C. Moldova Making Efficient Use Of Its Profits?

The high three-year median payout ratio of 100% (or a retention ratio of 0.4%) for S.C. Moldova suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

While S.C. Moldova has been growing its earnings, it only recently started to pay dividends which likely means that the company decided to impress new and existing shareholders with a dividend.

Conclusion

In total, we're a bit ambivalent about S.C. Moldova's performance. While the company has posted impressive earnings growth, its poor ROE and low earnings retention makes us doubtful if that growth could continue, if by any chance the business is faced with any sort of risk. So far, we've only made a quick discussion around the company's earnings growth. You can do your own research on S.C. Moldova 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.