Farm Pride Foods Limited (ASX:FRM) Stock Has Shown Weakness Lately But Financials Look Strong: Should Prospective Shareholders Make The Leap?

Farm Pride Foods (ASX:FRM) has had a rough three months with its share price down 29%. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Farm Pride Foods’ 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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part – they are all under $10bn in marketcap – there is still time to get in early.

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 Farm Pride Foods is:

16% = AU$6.7m ÷ AU$43m (Based on the trailing twelve months to June 2025).

The ‘return’ refers to a company’s earnings over the last year. So, this means that for every A$1 of its shareholder’s investments, the company generates a profit of A$0.16.

View our latest analysis for Farm Pride Foods

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.

At first glance, Farm Pride Foods seems to have a decent ROE. On comparing with the average industry ROE of 11% the company’s ROE looks pretty remarkable. This certainly adds some context to Farm Pride Foods’ exceptional 26% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company’s earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Farm Pride Foods’ growth is quite high when compared to the industry average growth of 14% in the same period, which is great to see.