Is Beng Kuang Marine Limited's (SGX:BEZ) Recent Stock Performance Tethered To Its Strong Fundamentals?

Beng Kuang Marine's (SGX:BEZ) stock is up by a considerable 20% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Beng Kuang Marine'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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To 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 Beng Kuang Marine is:

41% = S$14m ÷ S$33m (Based on the trailing twelve months to June 2025).

The 'return' is the amount earned after tax over the last twelve months. Another way to think of that is that for every SGD1 worth of equity, the company was able to earn SGD0.41 in profit.

View our latest analysis for Beng Kuang Marine

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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. 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 Beng Kuang Marine's Earnings Growth And 41% ROE

To begin with, Beng Kuang Marine has a pretty high ROE which is interesting. Additionally, the company's ROE is higher compared to the industry average of 9.0% which is quite remarkable. Under the circumstances, Beng Kuang Marine's considerable five year net income growth of 60% was to be expected.

We then compared Beng Kuang Marine'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 11% in the same 5-year 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. Is Beng Kuang Marine fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Beng Kuang Marine Using Its Retained Earnings Effectively?

Beng Kuang Marine has a really low three-year median payout ratio of 14%, meaning that it has the remaining 86% left over to reinvest into its business. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 19% over the next three years.

Summary

On the whole, we feel that Beng Kuang Marine'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. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. 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.

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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.