S.C. Imotrust S.A.'s (BVB:ARCV) Stock Is Going Strong: Have Financials A Role To Play?

S.C. Imotrust (BVB:ARCV) has had a great run on the share market with its stock up by a significant 23% over the last three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Particularly, we will be paying attention to S.C. Imotrust's ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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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 S.C. Imotrust is:

11% = RON10m ÷ RON93m (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every RON1 worth of equity, the company was able to earn RON0.11 in profit.

Check out our latest analysis for S.C. Imotrust

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. 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.

S.C. Imotrust's Earnings Growth And 11% ROE

On the face of it, S.C. Imotrust's ROE is not much to talk about. Although a closer study shows that the company's ROE is higher than the industry average of 5.4% which we definitely can't overlook. Even more so after seeing S.C. Imotrust's exceptional 24% net income growth over the past five years. 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. For example, it is possible that the broader industry is going through a high growth phase, or that the company has a low payout ratio.

We then compared S.C. Imotrust'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 6.6% in the same 5-year period.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if S.C. Imotrust is trading on a high P/E or a low P/E, relative to its industry.

Is S.C. Imotrust Efficiently Re-investing Its Profits?

S.C. Imotrust has very a high three-year median payout ratio of 178% 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. With that said, it could be worth keeping an eye on the high payout ratio as that's a huge risk. You can see the 2 risks we have identified for S.C. Imotrust by visiting our risks dashboard for free on our platform here.

Conclusion

In total, it does look like S.C. Imotrust has some positive aspects to its business. Specifically, its decent ROE which likely contributed to the growth in earnings. Bear in mind, the company reinvests little to none of its profits, which means that investors aren't necessarily reaping the full benefits of the decent rate of return. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of S.C. Imotrust'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.