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Greatech Technology Berhad (KLSE:GREATEC) has had a great run on the share market with its stock up by a significant 27% over the last three months. Given the company’s impressive performance, we decided to study its financial indicators more closely as a company’s financial health over the long-term usually dictates market outcomes. Specifically, we decided to study Greatech Technology Berhad’s ROE in this article.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company’s success at turning shareholder investments into profits.
Return on equity 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 Greatech Technology Berhad is:
14% = RM137m ÷ RM975m (Based on the trailing twelve months to June 2025).
The ‘return’ is the profit over the last twelve months. Another way to think of that is that for every MYR1 worth of equity, the company was able to earn MYR0.14 in profit.
View our latest analysis for Greatech Technology Berhad
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. 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.
To start with, Greatech Technology Berhad’s ROE looks acceptable. Especially when compared to the industry average of 6.9% the company’s ROE looks pretty impressive. Probably as a result of this, Greatech Technology Berhad was able to see a decent growth of 11% over the last five years.
When you consider the fact that the industry earnings have shrunk at a rate of 9.3% in the same 5-year period, the company’s net income growth is pretty remarkable.
Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Greatech Technology Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.
