Steadfast Group Limited’s (ASX:SDF) Stock Has Shown A Decent Performance: Have Financials A Role To Play?

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

Sat, May 10, 2025, 7:12 PM 4 min read

Steadfast Group’s (ASX:SDF) stock up by 4.4% over the past month. We wonder if and what role the company’s financials play in that price change as a company’s long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Steadfast Group’s ROE.

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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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.

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 Steadfast Group is:

11% = AU$281m ÷ AU$2.5b (Based on the trailing twelve months to December 2024).

The ‘return’ is the profit over the last twelve months. So, this means that for every A$1 of its shareholder’s investments, the company generates a profit of A$0.11.

See our latest analysis for Steadfast Group

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.

At first glance, Steadfast Group seems to have a decent ROE. Yet, the fact that the company’s ROE is lower than the industry average of 16% does temper our expectations. That being the case, the significant five-year 34% net income growth reported by Steadfast Group comes as a pleasant surprise. We believe that there might 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. However, not to forget, the company does have a decent ROE to begin with, just that it is lower than the industry average. So this also does lend some color to the high earnings growth seen by the company.