Is Angler Gaming plc's(NGM:ANGL) Recent Stock Performance Tethered To Its Strong Fundamentals?

By
Simply Wall St
Published
March 03, 2021
NGM:ANGL
Source: Shutterstock

Angler Gaming (NGM:ANGL) has had a great run on the share market with its stock up by a significant 49% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on Angler Gaming's ROE.

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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

View our latest analysis for Angler Gaming

How Do You Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for Angler Gaming is:

70% = €12m ÷ €16m (Based on the trailing twelve months to December 2020).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every SEK1 worth of equity, the company was able to earn SEK0.70 in profit.

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 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.

Angler Gaming's Earnings Growth And 70% ROE

Firstly, we acknowledge that Angler Gaming has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 20% which is quite remarkable. As a result, Angler Gaming's exceptional 42% net income growth seen over the past five years, doesn't come as a surprise.

Next, on comparing with the industry net income growth, we found that Angler Gaming's growth is quite high when compared to the industry average growth of 20% in the same period, which is great to see.

past-earnings-growth
NGM:ANGL Past Earnings Growth March 4th 2021

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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 ANGL fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Angler Gaming Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 65% (implying that it keeps only 35% of profits) for Angler Gaming suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Besides, Angler Gaming has been paying dividends over a period of three years. 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 is expected to keep paying out approximately 56% of its profits over the next three years. Still, forecasts suggest that Angler Gaming's future ROE will drop to 54% even though the the company's payout ratio is not expected to change by much.

Conclusion

Overall, we are quite pleased with Angler Gaming's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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This article by Simply Wall St is general in nature. 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.
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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.