Global Industrial Company’s (NYSE:GIC) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

editorial-team@simplywallst.com (Simply Wall St)

Mon, Apr 21, 2025, 6:45 AM 4 min read

With its stock down 15% over the past three months, it is easy to disregard Global Industrial (NYSE:GIC). However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. Specifically, we decided to study Global Industrial’s ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company’s success at turning shareholder investments into profits.

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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 Global Industrial is:

22% = US$61m ÷ US$281m (Based on the trailing twelve months to December 2024).

The ‘return’ is the income the business earned over the last year. So, this means that for every $1 of its shareholder’s investments, the company generates a profit of $0.22.

See our latest analysis for Global Industrial

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. 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, Global Industrial’s ROE looks acceptable. On comparing with the average industry ROE of 15% the company’s ROE looks pretty remarkable. However, for some reason, the higher returns aren’t reflected in Global Industrial’s meagre five year net income growth average of 4.8%. This is interesting as the high returns should mean that the company has the ability to generate high growth but for some reason, it hasn’t been able to do so. We reckon that a low growth, when returns are quite high could be the result of certain circumstances like low earnings retention or poor allocation of capital.