Simply Wall St
4 min read
With its stock down 22% over the past three months, it is easy to disregard Keyfield International Berhad (KLSE:KEYFIELD). 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. In this article, we decided to focus on Keyfield International Berhad’s ROE.
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. 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 Keyfield International Berhad is:
30% = RM218m ÷ RM715m (Based on the trailing twelve months to March 2025).
The ‘return’ is the yearly profit. That means that for every MYR1 worth of shareholders’ equity, the company generated MYR0.30 in profit.
See our latest analysis for Keyfield International Berhad
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.
Firstly, we acknowledge that Keyfield International Berhad has a significantly high ROE. Secondly, even when compared to the industry average of 13% the company’s ROE is quite impressive. So, the substantial 45% net income growth seen by Keyfield International Berhad over the past five years isn’t overly surprising.
We then compared Keyfield International Berhad’s 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 33% in the same 5-year period.
Earnings growth is a huge factor in stock valuation. 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. If you’re wondering about Keyfield International Berhad’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
