Most readers would already know that the CAB Cakaran Corporation Berhad (KLSE:CAB) share price has increased by a significant 12% over the past month. Given that the market rewards strong financials in the long run, I wonder if that will be the case this time as well. In this article, we decided to focus on CAB Cakaran Corporation Berhad's ROE.
Return on equity or ROE is an important factor to be considered by a shareholder as it indicates how effectively their capital is being reinvested. More simply, it measures a company's profitability in relation to shareholder equity.
See our latest analysis for CAB Cakaran Corporation Berhad.
How is ROE calculated?
of ROE calculation formula teeth:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, CAB Cakaran Corporation Berhad's ROE is:
16% = RM135m ÷ RM827m (Based on trailing 12 months to December 2023).
“Return” is the profit over the past 12 months. Another way to think of it is that for every RM1 worth of shares, the company was able to earn him RM0.16 in profit.
What is the relationship between ROE and profit growth rate?
So far, we have learned that ROE is a measure of a company's profitability. Depending on how much of these profits a company reinvests or “retains”, and how effectively it does so, we are then able to assess a company's earnings growth potential. All else being equal, companies with higher return on equity and profit retention typically have higher growth rates compared to companies that don't have the same characteristics.
A side-by-side comparison of CAB Cakaran Corporation Berhad's earnings growth and ROE of 16%.
At first glance, CAB Cakaran Corporation Berhad appears to have a decent ROE. His ROE for the company looks pretty good, especially when compared to the industry average of 7.5%. This probably laid the foundation for CAB Cakaran Corporation Berhad's impressive net profit growth of 58% over the past five years. We believe that other factors may also be at play here. Maintaining high profits and efficient management, etc.
We then compare it to the industry's net income growth rate, which is great to see that CAB Cakaran Corporation Berhad's growth rate is quite high when compared to the industry average growth rate of 25% over the same period.
Earnings growth is an important metric to consider when evaluating a stock. It's important for investors to know whether the market is pricing in a company's expected earnings growth (or decline). Doing so will help you determine whether a stock's future is promising or ominous. Is CAB Cakaran Corporation Berhad fairly valued compared to other companies? These 3 valuation metrics can help you decide.
Is CAB Cakaran Corporation Berhad effectively utilizing its retained earnings?
CAB Cakaran Corporation Berhad's three-year median payout ratio is quite low at 3.3%, meaning that 97% remains to be reinvested into the business. So it seems CAB Cakaran Corporation Berhad is reinvesting a lot of its profits to grow its business, and it's showing in its revenue growth.
Additionally, CAB Cakaran Corporation Berhad has been paying dividends for seven years. This shows that the company is committed to sharing profits with shareholders.
summary
Overall, we feel that CAB Cakaran Corporation Berhad's performance is very positive. In particular, it's great to see that the company has invested heavily in its business, delivering strong revenue growth along with high rates of return.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
