Is Kimly Limited's (Catalist:1D0) Recent Stock Performance Influenced By Its Fundamentals In Any Way?
Kimly (Catalist:1D0) has had a great run on the share market with its stock up by a significant 8.2% over the last month. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Particularly, we will be paying attention to Kimly's ROE today.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
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The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Kimly is:
19% = S$36m ÷ S$190m (Based on the trailing twelve months to September 2024).
The 'return' is the yearly profit. That means that for every SGD1 worth of shareholders' equity, the company generated SGD0.19 in profit.
View our latest analysis for Kimly
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.
To begin with, Kimly seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 7.0%. This certainly adds some context to Kimly's decent 8.4% net income growth seen over the past five years.
As a next step, we compared Kimly's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 32% in the same period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It's important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. What is 1D0 worth today? The intrinsic value infographic in our free research report helps visualize whether 1D0 is currently mispriced by the market.
While Kimly has a three-year median payout ratio of 61% (which means it retains 39% of profits), the company has still seen a fair bit of earnings growth in the past, meaning that its high payout ratio hasn't hampered its ability to grow.
Besides, Kimly has been paying dividends over a period of eight years. This shows that the company is committed to sharing profits with its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 65%. As a result, Kimly's ROE is not expected to change by much either, which we inferred from the analyst estimate of 17% for future ROE.
In total, it does look like Kimly has some positive aspects to its business. Its earnings have grown respectably as we saw earlier, which was likely due to the company reinvesting its earnings at a pretty high rate of return. However, given the high ROE, we do think that the company is reinvesting a small portion of its profits. This could likely be preventing the company from growing to its full extent. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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