With its stock down 21% in the past three months, it’s easy to overlook Media and Games Invest (ETR: M8G). But if you pay close attention to it, you might find that its key financial metrics look pretty decent, which could mean the stock could potentially rise in the long term given how markets typically reward long-term fundamentals. more resistant term. Specifically, we have decided to study the ROE of Media and Games Invest in this article.
Return on equity or ROE is a key metric used to assess the efficiency with which the management of a business is using business capital. In other words, it reveals the company’s success in turning shareholders’ investments into profits.
Check out our latest analysis for Media and Games Invest
How do you calculate return on equity?
The formula for ROE is:
Return on equity = Net income (from continuing operations) Ã· Equity
Thus, based on the above formula, the ROE for Media and Games Invest is:
2.7% = 7.9 million euros Ã· 293 million euros (based on the last twelve months up to June 2021).
âReturnâ refers to a company’s profits over the past year. Another way to look at this is that for every $ 1 in shares, the company was able to make $ 0.03 in profit.
What does ROE have to do with profit growth?
So far we’ve learned that ROE measures how efficiently a business generates profits. We now need to assess how much profit the company is reinvesting or “holding back” for future growth, which then gives us an idea of ââthe growth potential of the company. Assuming everything else remains the same, the higher the ROE and profit retention, the higher the growth rate of a business compared to businesses that don’t necessarily have these characteristics.
Media and Games Invest profit growth and 2.7% ROE
At first glance, Media and Games Invest’s ROE is not much to say. We then compared the company’s ROE to that of the industry as a whole and were disappointed to find that the ROE is below the industry average of 3.8%. Despite this, surprisingly, Media and Games Invest have achieved exceptional net income growth of 25% over the past five years. Thus, there could be other aspects that positively influence the growth of the company’s profits. 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.
Then, comparing with the growth in net income of the industry, we found that the growth figure reported by Media and Games Invest compares quite favorably with the industry average, which shows a decrease of 4.9%. during the same period.
Profit growth is a huge factor in the valuation of stocks. What investors next need to determine is whether the expected earnings growth, or lack thereof, is already built into the share price. This then helps them determine whether the stock is set for a bright or dark future. Media and Games Invest is it just valued compared to other companies? These 3 evaluation measures could help you decide.
Does Media and Games Invest use its profits efficiently?
Media and Games Invest does not currently pay any dividends, which essentially means that it has reinvested all of its profits back into the business. This certainly contributes to the high number of profit growth we discussed above.
Overall, we think Media and Games Invest definitely has some positive factors to consider. With a high reinvestment rate, but a low ROE, the company has managed to see considerable growth in profits. That said, the latest forecast from industry analysts shows that the company’s earnings are expected to pick up. To learn more about the company’s future earnings growth forecast, take a look at this free analyst forecast report for the company to learn more.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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