Will Weakness in Atlan Holdings Bhd's (KLSE:ATLAN) Stock Prove Temporary Given Strong Fundamentals?

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Atlan Holdings Bhd (KLSE:ATLAN) has had a rough three months with its share price down 2.0%. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. In this article, we decided to focus on Atlan Holdings Bhd's ROE.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
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How To Calculate Return On Equity?
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Atlan Holdings Bhd is:
12% = RM65m ÷ RM532m (Based on the trailing twelve months to May 2025).
The 'return' is the profit over the last twelve months. So, this means that for every MYR1 of its shareholder's investments, the company generates a profit of MYR0.12.
Check out our latest analysis for Atlan Holdings Bhd
Why Is ROE Important For Earnings Growth?
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. 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.
Atlan Holdings Bhd's Earnings Growth And 12% ROE
At first glance, Atlan Holdings Bhd seems to have a decent ROE. Even when compared to the industry average of 11% the company's ROE looks quite decent. Consequently, this likely laid the ground for the impressive net income growth of 67% seen over the past five years by Atlan Holdings Bhd. We believe that there might also 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.
As a next step, we compared Atlan Holdings Bhd's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 20%.
Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Atlan Holdings Bhd's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Is Atlan Holdings Bhd Efficiently Re-investing Its Profits?
The high three-year median payout ratio of 86% (implying that it keeps only 14% of profits) for Atlan Holdings Bhd suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.
Additionally, Atlan Holdings Bhd has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders.
Summary
On the whole, we feel that Atlan Holdings Bhd's performance has been quite good. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. So it may be worth checking this free detailed graph of Atlan Holdings Bhd's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.
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