Heidelberg Materials AG (ETR:HEI) Stock Has Shown Weakness Lately But Financials Look Strong: Should Prospective Shareholders Make The Leap?

Heidelberg Materials (ETR:HEI) has had a rough month with its share price down 3.2%. However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. Specifically, we decided to study Heidelberg Materials’ 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. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

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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 Heidelberg Materials is:

11% = €2.0b ÷ €18b (Based on the trailing twelve months to June 2025).

The ‘return’ is the profit over the last twelve months. One way to conceptualize this is that for each €1 of shareholders’ capital it has, the company made €0.11 in profit.

Check out our latest analysis for Heidelberg Materials

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.

To begin with, Heidelberg Materials seems to have a respectable ROE. Further, the company’s ROE compares quite favorably to the industry average of 7.9%. Probably as a result of this, Heidelberg Materials was able to see an impressive net income growth of 37% over the last five years. We believe that there might also be other aspects that are positively influencing the company’s earnings growth. Such as – high earnings retention or an efficient management in place.

We then compared Heidelberg Materials’ 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 8.9% in the same 5-year period.