Is Sarine Technologies Ltd.'s (SGX:U77) Recent Performance Underpinned By Weak Financials?
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
View our latest analysis for Sarine Technologies
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 Sarine Technologies is:
1.9% = US$1.1m ÷ US$57m (Based on the trailing twelve months to December 2024).
The 'return' is the income the business earned over the last year. One way to conceptualize this is that for each SGD1 of shareholders' capital it has, the company made SGD0.02 in profit.
So far, we've learned that ROE is a measure of a company's profitability. 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. 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.
It is hard to argue that Sarine Technologies' ROE is much good in and of itself. Even compared to the average industry ROE of 7.0%, the company's ROE is quite dismal. Therefore, it might not be wrong to say that the five year net income decline of 20% seen by Sarine Technologies was possibly a result of it having a lower ROE. We believe that there also might be other aspects that are negatively influencing the company's earnings prospects. Such as - low earnings retention or poor allocation of capital.
So, as a next step, we compared Sarine Technologies' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 10% over the last few years.
Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. 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 Sarine Technologies''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
With a high three-year median payout ratio of 60% (implying that 40% of the profits are retained), most of Sarine Technologies' profits are being paid to shareholders, which explains the company's shrinking earnings. With only very little left to reinvest into the business, growth in earnings is far from likely. To know the 3 risks we have identified for Sarine Technologies visit our risks dashboard for free.
In addition, Sarine Technologies has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth.
On the whole, Sarine Technologies' performance is quite a big let-down. The company has seen a lack of earnings growth as a result of retaining very little profits and whatever little it does retain, is being reinvested at a very low rate of return. Up till now, we've only made a short study of the company's growth data. You can do your own research on Sarine Technologies and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.
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.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Bloomberg
an hour ago
- Bloomberg
Stock Movers: Intel, Applied Materials, TeraWulf
On this edition of Stock Movers: - Intel (INTC) shares jumped today after Bloomberg News reported that the Trump administration is in talks with Intel Corp. to have the US government potentially take a stake in the beleaguered chipmaker, according to people familiar with the plan, in the latest sign of the White House's willingness to blur the lines between state and industry. The deal would help shore up Intel's planned factory hub in Ohio, said the people, who asked not to be identified because the deliberations are private. The company had once promised to turn that site into the world's largest chipmaking facility, though it's been repeatedly delayed. The size of the potential stake isn't clear. The plans stem from a meeting this week between President Donald Trump and Intel Chief Executive Officer Lip-Bu Tan, the people said. While the details are still being sorted, the idea is for the US government to pay for the stake, one of the people said. Another cautioned that the plans remain fluid. - Applied Materials (AMAT) shares tumbled today as the largest American producer of chipmaking gear, plunged in late trading after giving a disappointing sales and profit forecast, renewing concerns that the US trade dispute with China is weighing on demand. Revenue will be approximately $6.7 billion in the fiscal fourth quarter, the company said in a statement Thursday. Analysts had estimated $7.32 billion on average. Profit will be about $2.11 a share, excluding some items, compared with a projection of $2.38. The company is seeing less demand from customers in China, Chief Executive Officer Gary Dickerson said in an interview. It also faces delays in approval for exporting technology to that country, he said. Moreover, large customers are putting off some purchases in the face of prolonged negotiations around tariffs and other economic issues. - TeraWulf (WULF) shares rose as much as 53%, the most since March 2022, after Google took the equivalent of an around 8% stake in the company as the Bitcoin miner and data center operator signed two 10-year high-performance computing co-location deals with AI cloud platform operator Fluidstack.
Bloomberg
an hour ago
- Bloomberg
US Offers $1B in Funding to Scale Critical Mineral Supply Chains
The US Department of Energy intends to offer funding opportunities totaling nearly $1 billion 'to advance and scale mining, processing, and manufacturing technologies across key stages of the critical minerals and materials supply chains,' it says in a statement. The funding would accelerate the US critical minerals and materials sector and reduce reliance on foreign suppliers, according to officials. Factorial CEO Siyu Huang joins Bloomberg Businessweek Daily to discuss rare earth mineral supply chains, the company's Mercedes partnership, solid state battery manufacturing, and more. (Source: Bloomberg)
Bloomberg
an hour ago
- Bloomberg
US Consumers See More of a Markup From Trump's Tariffs
More data from the government shows inflation reigniting because of the US trade war. Wholesale inflation accelerated in July by the most in three years, suggesting companies are passing along higher import costs related to tariffs. Simultaneously, applications for US unemployment benefits edged lower last week, suggesting employers may be reluctant to fire workers. The producer price index increased 0.9% from a month earlier, the largest advance since pandemic consumer inflation peaked in June 2022, according to a report from the Bureau of Labor Statistics (which may soon be taken over by a Donald Trump loyalist).
