S.N. Nuclearelectrica S.A.'s (BVB:SNN) Stock Has Fared Decently: Is the Market Following Strong Financials?

S.N. Nuclearelectrica's (BVB:SNN) stock up by 7.4% over the past three months. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. Particularly, we will be paying attention to S.N. Nuclearelectrica's ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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.N. Nuclearelectrica is:

15% = RON2.0b ÷ RON13b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax 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 RON0.15 in profit.

View our latest analysis for S.N. Nuclearelectrica

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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 S.N. Nuclearelectrica's Earnings Growth And 15% ROE

To start with, S.N. Nuclearelectrica's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 9.4%. This certainly adds some context to S.N. Nuclearelectrica's decent 16% net income growth seen over the past five years.

We then performed a comparison between S.N. Nuclearelectrica's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 14% 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. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. 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.N. Nuclearelectrica is trading on a high P/E or a low P/E, relative to its industry.

Is S.N. Nuclearelectrica Making Efficient Use Of Its Profits?

S.N. Nuclearelectrica has a three-year median payout ratio of 47%, which implies that it retains the remaining 53% of its profits. This suggests that its dividend is well covered, and given the decent growth seen by the company, it looks like management is reinvesting its earnings efficiently.

Besides, S.N. Nuclearelectrica has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 65% over the next three years. Accordingly, the expected increase in the payout ratio explains the expected decline in the company's ROE to 1.1%, over the same period.

Summary

On the whole, we feel that S.N. Nuclearelectrica's performance has been quite good. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, on studying the latest analyst forecasts, we found that while the company has seen growth in its past earnings, analysts expect its future earnings to shrink. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.