Hotel Properties Limited's (SGX:H15) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Most readers would already be aware that Hotel Properties' (SGX:H15) stock increased significantly by 13% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to Hotel Properties' ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Hotel Properties is:

0.9% = S$22m ÷ S$2.4b (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every SGD1 worth of equity, the company was able to earn SGD0.01 in profit.

Check out our latest analysis for Hotel Properties

What Has ROE Got To Do With 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. 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.

A Side By Side comparison of Hotel Properties' Earnings Growth And 0.9% ROE

It is quite clear that Hotel Properties' ROE is rather low. Even compared to the average industry ROE of 6.5%, the company's ROE is quite dismal. In spite of this, Hotel Properties was able to grow its net income considerably, at a rate of 60% in the last five years. We reckon that there could be other factors at play here. Such as - high earnings retention or an efficient management in place.

We then compared Hotel Properties' 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 43% 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. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Hotel Properties''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Hotel Properties Efficiently Re-investing Its Profits?

Hotel Properties has a significant three-year median payout ratio of 87%, meaning the company only retains 13% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.

Moreover, Hotel Properties is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.

Conclusion

On the whole, we do feel that Hotel Properties has some positive attributes. That is, quite an impressive growth in earnings. However, the low profit retention means that the company's earnings growth could have been higher, had it been reinvesting a higher portion of its profits. Up till now, we've only made a short study of the company's growth data. To gain further insights into Hotel Properties' past profit growth, check out this visualization of past earnings, revenue and cash flows.

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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.