Simply Wall St
4 min read
OpenSys (M) Berhad’s (KLSE:OPENSYS) stock up by 1.6% over the past week. Given that stock prices are usually aligned with a company’s financial performance in the long-term, we decided to investigate if the company’s decent financials had a hand to play in the recent price move. Particularly, we will be paying attention to OpenSys (M) Berhad’s ROE today.
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. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
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 OpenSys (M) Berhad is:
13% = RM12m ÷ RM93m (Based on the trailing twelve months to March 2025).
The ‘return’ refers to a company’s earnings over the last year. One way to conceptualize this is that for each MYR1 of shareholders’ capital it has, the company made MYR0.13 in profit.
Check out our latest analysis for OpenSys (M) Berhad
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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, OpenSys (M) Berhad seems to have a respectable ROE. Especially when compared to the industry average of 9.1% the company’s ROE looks pretty impressive. Yet, OpenSys (M) Berhad has posted measly growth of 2.0% over the past five years. That’s a bit unexpected from a company which has such a high rate of return. Such a scenario is likely to take place when a company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
Next, on comparing with the industry net income growth, we found that OpenSys (M) Berhad’s reported growth was lower than the industry growth of 9.5% over the last few years, which is not something we like to see.
