ALDANI MASTER CAPITAL S.A.'s (BVB:ALDANI) Stock Has Seen Strong Momentum: Does That Call For Deeper Study Of Its Financial Prospects?

ALDANI MASTER CAPITAL's (BVB:ALDANI) stock is up by a considerable 77% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to ALDANI MASTER CAPITAL'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. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

See our latest analysis for ALDANI MASTER CAPITAL

How To Calculate Return On Equity?

The formula for return on equity is:

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

So, based on the above formula, the ROE for ALDANI MASTER CAPITAL is:

11% = RON1.4m ÷ RON13m (Based on the trailing twelve months to June 2024).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every RON1 of its shareholder's investments, the company generates a profit of RON0.11.

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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

ALDANI MASTER CAPITAL's Earnings Growth And 11% ROE

When you first look at it, ALDANI MASTER CAPITAL's ROE doesn't look that attractive. Although a closer study shows that the company's ROE is higher than the industry average of 8.4% which we definitely can't overlook. Particularly, the substantial 62% net income growth seen by ALDANI MASTER CAPITAL over the past five years is impressive . That being said, the company does have a slightly low ROE to begin with, just that it is higher than the industry average. Therefore, the growth in earnings could also be the result of other factors. E.g the company has a low payout ratio or could belong to a high growth industry.

Next, on comparing with the industry net income growth, we found that ALDANI MASTER CAPITAL's growth is quite high when compared to the industry average growth of 25% in the same period, which is great to see.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is ALDANI MASTER CAPITAL fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is ALDANI MASTER CAPITAL Using Its Retained Earnings Effectively?

The really high three-year median payout ratio of 102% for ALDANI MASTER CAPITAL suggests that the company is paying its shareholders more than what it is earning. Despite this, the company's earnings grew significantly as we saw above. Although, it could be worth keeping an eye on the high payout ratio as that's a huge risk. You can see the 4 risks we have identified for ALDANI MASTER CAPITAL by visiting our risks dashboard for free on our platform here.

While ALDANI MASTER CAPITAL 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.

Conclusion

Overall, we feel that ALDANI MASTER CAPITAL certainly does have some positive factors to consider. Especially the growth in earnings which was backed by a moderate ROE. Still, the ROE could have been even more beneficial to investors had the company been reinvesting more of its profits. As highlighted earlier, the current reinvestment rate appears to be negligible. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. To gain further insights into ALDANI MASTER CAPITAL's past profit growth, check out this visualization 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.