Do Its Financials Have Any Role To Play In Driving IMINT Image Intelligence AB (publ.)'s (NGM:IMINT) Stock Up Recently?

IMINT Image Intelligence AB (publ.)'s (NGM:IMINT) stock is up by a considerable 67% over the past 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. Specifically, we decided to study IMINT Image Intelligence AB (publ.)'s ROE in this article.

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.

Check out our latest analysis for IMINT Image Intelligence AB (publ.)

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 IMINT Image Intelligence AB (publ.) is:

3.0% = kr1.7m ÷ kr57m (Based on the trailing twelve months to December 2020).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every SEK1 worth of equity, the company was able to earn SEK0.03 in profit.

What Is The Relationship Between ROE And Earnings Growth?

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

IMINT Image Intelligence AB (publ.)'s Earnings Growth And 3.0% ROE

On the face of it, IMINT Image Intelligence AB (publ.)'s ROE is not much to talk about. Next, when compared to the average industry ROE of 16%, the company's ROE leaves us feeling even less enthusiastic. However, we we're pleasantly surprised to see that IMINT Image Intelligence AB (publ.) grew its net income at a significant rate of 24% in the last five years. We reckon that there could be other factors at play here. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then performed a comparison between IMINT Image Intelligence AB (publ.)'s net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 24% in the same period.

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. This then helps them determine if the stock is placed for a bright or bleak future. 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 IMINT Image Intelligence AB (publ.) is trading on a high P/E or a low P/E, relative to its industry.

Is IMINT Image Intelligence AB (publ.) Making Efficient Use Of Its Profits?

Conclusion

Overall, we feel that IMINT Image Intelligence AB (publ.) certainly does have some positive factors to consider. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. Our risks dashboard would have the 2 risks we have identified for IMINT Image Intelligence AB (publ.).

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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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