Most readers will already know that IMMOFINANZ (VIE:IIA) stock is up a significant 12% over the past three months. As most know, fundamentals are what generally guide market price movements over the long term, so we decided to take a look at key financial indicators in business today to see if they have a role to play. play in the recent price movement. In particular, we will be paying close attention to IMMOFINANZ’s ROE today.
Return on equity or ROE is an important factor for a shareholder to consider as it tells them how much of their capital is being reinvested. In other words, it reveals the company’s success in turning shareholders’ investments into profits.
Check out our latest review for IMMOFINANZ
How is ROE calculated?
the ROE formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the formula above, the ROE for IMMOFINANZ is:
6.7% = €228 million ÷ €3.4 billion (based on the last twelve months until September 2021).
“Yield” is the income the business has earned over the past year. This means that for every €1 of equity, the company generated €0.07 of profit.
Why is ROE important for earnings growth?
So far, we have learned that ROE measures how efficiently a company generates its profits. We now need to assess how much profit the company is reinvesting or “retaining” for future growth, which then gives us an idea of the company’s growth potential. Assuming all else is equal, companies that have both a higher return on equity and better earnings retention are generally the ones with a higher growth rate compared to companies that don’t. same characteristics.
IMMOFINANZ earnings growth and ROE of 6.7%
When you first look at it, IMMOFINANZ’s ROE doesn’t look so appealing. However, its ROE is similar to the industry average of 7.9%, so we won’t dismiss the company altogether. On the other hand, IMMOFINANZ has recorded a moderate net income growth of 9.2% over the past five years. Considering that ROE is not particularly high, we believe that there could also be other factors at play that could influence the growth of the business. For example, it is possible that the management of the company has made good strategic decisions or that the company has a low payout ratio.
In a next step, we benchmarked IMMOFINANZ’s net income growth with the industry, and fortunately, we found that the growth the company saw was above the industry average growth of 6.0% .
Earnings growth is an important metric to consider when evaluating a stock. What investors then need to determine is whether the expected earnings growth, or lack thereof, is already priced into the stock price. By doing so, they will get an idea if the stock is headed for clear blue waters or if swampy waters are waiting. Has the market priced in IIA’s future prospects? You can find out in our latest infographic research report on intrinsic value.
Does IMMOFINANZ use its retained earnings effectively?
IMMOFINANZ has a healthy combination of a moderate three-year median payout ratio of 38% (or a retention rate of 62%) and respectable earnings growth as seen above, which means that the company has made efficient use of its profits.
Moreover, IMMOFINANZ has paid dividends over a period of at least ten years, which means that the company is quite serious about sharing its profits with shareholders. Looking at current analyst consensus data, we can see that the company’s future payout ratio is expected to reach 80% over the next three years. Either way, ROE is not expected to change much for the company despite the higher expected payout ratio.
Overall, we think IMMOFINANZ certainly has some positive factors to consider. Even despite the low rate of return, the company has shown impressive earnings growth thanks to massive reinvestment in its business. That said, in studying the latest analyst forecasts, we found that while the company has seen growth in past earnings, analysts expect future earnings to decline. To learn more about the latest analyst forecasts for the company, check out this analyst forecast visualization for the company.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.