06-05-2025
Are Karin Technology Holdings Limited's (SGX:K29) Mixed Financials Driving The Negative Sentiment?
With its stock down 3.5% over the past month, it is easy to disregard Karin Technology Holdings (SGX:K29). It is possible that the markets have ignored the company's differing financials and decided to lean-in to the negative sentiment. Long-term fundamentals are usually what drive market outcomes, so it's worth paying close attention. Particularly, we will be paying attention to Karin Technology Holdings' ROE today.
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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
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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 Karin Technology Holdings is:
4.5% = HK$18m ÷ HK$403m (Based on the trailing twelve months to December 2024).
The 'return' refers to a company's earnings over the last year. So, this means that for every SGD1 of its shareholder's investments, the company generates a profit of SGD0.05.
View our latest analysis for Karin Technology Holdings
So far, we've learned that ROE is a measure of a company's profitability. 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.
When you first look at it, Karin Technology Holdings' ROE doesn't look that attractive. We then compared the company's ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 8.5%. However, the moderate 14% net income growth seen by Karin Technology Holdings over the past five years is definitely a positive. So, the growth in the company's earnings could probably have been caused by other variables. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.
Next, on comparing with the industry net income growth, we found that the growth figure reported by Karin Technology Holdings compares quite favourably to the industry average, which shows a decline of 4.2% over the last few years.
Earnings growth is an important metric to consider when valuing a stock. It's important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Karin Technology Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.
Karin Technology Holdings has a significant three-year median payout ratio of 100%, meaning that it is left with only -0.02% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.
Moreover, Karin Technology Holdings is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.
In total, we're a bit ambivalent about Karin Technology Holdings' performance. While the company has posted impressive earnings growth, its poor ROE and low earnings retention makes us doubtful if that growth could continue, if by any chance the business is faced with any sort of risk. 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 Karin Technology Holdings' past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.
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