editorial-team@simplywallst.com (Simply Wall St)
3 min read
It is hard to get excited after looking at Mobilia Holdings Berhad’s (KLSE:MOBILIA) recent performance, when its stock has declined 13% over the past three months. 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 Mobilia Holdings Berhad’s ROE in this article.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. Put another way, it reveals the company’s success at turning shareholder investments into profits.
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Mobilia Holdings Berhad is:
17% = RM13m ÷ RM80m (Based on the trailing twelve months to December 2024).
The ‘return’ is the profit over the last twelve months. That means that for every MYR1 worth of shareholders’ equity, the company generated MYR0.17 in profit.
See our latest analysis for Mobilia Holdings Berhad
So far, we’ve learned that ROE is a measure of a company’s profitability. 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 start with, Mobilia Holdings Berhad’s ROE looks acceptable. Especially when compared to the industry average of 5.0% the company’s ROE looks pretty impressive. This probably laid the ground for Mobilia Holdings Berhad’s moderate 7.0% net income growth seen over the past five years.
As a next step, we compared Mobilia Holdings Berhad’s net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 7.3% in the same period.
Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Has the market priced in the future outlook for MOBILIA? You can find out in our latest intrinsic value infographic research report
