Is Fulgent Genetics, Inc.'s (NASDAQ:FLGT) Latest Stock Performance A Reflection Of Its Financial Health?

Simply Wall St
·3 min read

Most readers would already be aware that Fulgent Genetics' (NASDAQ:FLGT) stock increased significantly by 17% over the past month. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Particularly, we will be paying attention to Fulgent Genetics' ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

See our latest analysis for Fulgent Genetics

How Is ROE Calculated?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Fulgent Genetics is:

21% = US$270m ÷ US$1.3b (Based on the trailing twelve months to September 2022).

The 'return' is the amount earned after tax over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.21 in profit.

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Fulgent Genetics' Earnings Growth And 21% ROE

To start with, Fulgent Genetics' ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 13%. This probably laid the ground for Fulgent Genetics' significant 70% net income growth seen over the past five years. We reckon that there could also be other factors at play here. 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.

We then compared Fulgent Genetics' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 16% in the same period.

past-earnings-growth
past-earnings-growth

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. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Fulgent Genetics''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Fulgent Genetics Efficiently Re-investing Its Profits?

Given that Fulgent Genetics doesn't pay any dividend to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Conclusion

Overall, we are quite pleased with Fulgent Genetics' performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, on studying the latest analyst forecasts, we found that while the company has seen growth in its past earnings, analysts expect its future earnings to shrink. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here

  • Up next
  • Up next
  • Up next
  • Up next

Latest Stories

  • Does Eating Sugar REALLY Makes Kids Hyper? Expert Explains The Science Behind It

    Myth or fact?

  • Laurence Fox ordered to pay £180,000 in damages after wrongly branding two people paedophiles

    The actor-turned-politician was successfully sued by former Stonewall trustee Simon Blake and drag artist Crystal over a row on Twitter

  • Robin Swann votes against budget and warns it could see health services collapse

    The Stormont powersharing Executive has agreed a budget for the current financial year.

  • Q1 2024 Perfect Corp Earnings Call

    Q1 2024 Perfect Corp Earnings Call

  • The Latest: Trump takes to social media before Supreme Court arguments

    WASHINGTON (AP) — The U.S. Supreme Court is taking up Donald Trump's bid to avoid prosecution over his efforts to overturn his 2020 election loss to Democrat Joe Biden. Arguments are set to begin at 10 a.m. Trump’s lawyers argue that former presidents are entitled to absolute immunity for their official acts. Otherwise, they say, politically motivated prosecutions of former occupants of the Oval Office would become routine and presidents couldn’t function as the commander in chief if they had to

  • I Just Found Out That Ringworm Isn't Actually A Worm. This Is What It Really Is

    Am I the only one that thought ringworm was really a worm?!

  • Harvey Weinstein’s rape conviction overturned over ‘crucial mistake’ by New York judge

    The former Hollywood producer will remain behind bars in California

  • Biden and 17 other world leaders call for ‘immediate release’ of hostages held by Hamas

    ‘There is a deal on the table that would bring a ceasefire immediately to Gaza... and Hamas has rejected that,’ said a White House official, referring to a pending negotiation currently ongoing in Qatar

  • Data shows strong housing affordability in Brant County

    Data findings show housing is affordable for the vast majority of Brant County residents, but one local councillor says there is still some reason for concern. Eighty-five per cent of Brant County residents live in homes that meet affordability criteria for Canada, the administration and operations committee heard last week. The number, pulled from the 2021 Statistics Canada census profile, is based on the criteria that no more than 30 per cent of before-tax household income goes toward housing.

  • GLOBAL MARKETS-Stocks struggle after Meta moodswings, tepid US GDP

    Stocks snapped a three-day winning streak on Thursday as disappointing forecasts from Facebook and Instagram owner Meta hammered the tech sector, while FX markets watched Japan's yen sink through 155 per dollar for the first time since 1990. Tepid U.S. GDP data pushed Wall Street lower at its open but with more 'Big Tech' earnings scheduled for later it was Meta's slump that soured the mood the most.

  • Harvey Weinstein's 2020 rape conviction overturned

    New York court of appeal states disgraced Hollywood film mogul did not receive a fair trial.

  • Englehart council discusses pet ownership issues

    Darlene Wroe Local Journalism Initiative Reporter ENGLEHART - Englehart council and staff discussed a strategy to address what is becoming a pet ownership issue in the town at their recent committee-of-the-whole meeting. The April 10 discussion started off with a strategy to encourage people to stoop and scoop their pet waste. An initial proposal was to provide dispensers downtown so that people could take one and remove their pet's waste. But that suggestion was not favoured because, it was poi

  • Miner BHP offers $38.8 bln for rival Anglo American

    STORY: Mining giant BHP proposed a near $39 billion takeover of Anglo American on Thursday (April 25)...Offering a deal which would create the world’s biggest copper miner.BHP, the world’s largest listed miner, said its offer valued each Anglo share at $31.39, at a premium of 31%...Sending the London-listed company’s shares 13% higher in early trading. Australia's BHP also said it will carve out Anglo’s iron ore and platinum assets in South Africa, where it has no activities itself.Anglo, which owns mines in countries including Chile, South Africa, Brazil and Australia, said it was reviewing BHP's unsolicited, non-binding and highly conditional proposal. Under UK takeover rules, BHP has until May 22 to make a firm offer.Analyst at Hargreaves Lansdown, Susannah Streeter:"If this bid is accepted, it would be a mega deal in the mining industry. And the reason why BHP is particularly interested in Anglo American is because it has some pretty vast copper operations and copper is seen as crucial in the green transition."And if agreed, this deal would forge a copper mining group with about 10% of global output. It could also trigger further transactions in the sector, which has seen a rush of mergers and acquisitions as companies review portfolios to raise exposure to metals considered critical to the global energy transition.A takeover of Anglo by BHP would likely be among the 10 biggest-ever mining deals by value.It has the potential to delist Anglo from the London market – a fresh blow to an exchange that is struggling to retain big companies and attract IPOs.But some said BHP would need to offer more to get a deal.

  • Is Brighton vs Manchester City on TV? Kick off time, channel and how watch Premier League fixture

    Everything you need to know about the Premier League fixture

  • Weather At Your School Live In Old Orchard Beach

    Weather At Your School Live In Old Orchard Beach

  • Bird Caught Impersonating Police Van Confuses Officers

    British Police officers were left "confused" by a bird when it convincingly mimicked the sound of the sirens on their cars. Thames Valley Police said staff initially thought their vehicles had developed a fault after hearing the noise at a policing base in Bicester. A video filmed at the site in Oxfordshire and posted on social media shows the bird chirping in a tree, before then replicating the sound of a two-tone siren. Social media users speculated that the bird could be a starling, which are known for their ability to mimic man-made noises.

  • Laurence Fox ordered to pay £180,000 after calling two people paedophiles on Twitter

    Laurence Fox has been ordered to pay a total of £180,000 in damages to two people he referred to as paedophiles on social media after losing a High Court libel battle.

  • Will Labour’s plan make train tickets cheaper?

    What impact will Labour's pledge to nationalise the railways have?

  • Midsomer Murders star John Nettles looks so different in throwback to early career

    Midsomer Murders star John Nettles looked completely different in some of his early roles. Take a look back at his career here, from his first on-screen debut to what he's up to now…

  • Taylor Swift and Travis Kelce Took a Couple's Vacation With Gigi Hadid and Bradley Cooper

    Mama Kelce just spilled the tea.