Is Imaspro Corporation Berhad's (KLSE:IMASPRO) Recent Stock Performance Influenced By Its Financials In Any Way?

Imaspro Corporation Berhad's (KLSE:IMASPRO) stock up by 4.6% over the past three months. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to investigate if the company's decent financials had a hand to play in the recent price move. Specifically, we decided to study Imaspro Corporation Berhad's ROE in this article.

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.

View our latest analysis for Imaspro Corporation Berhad

How To Calculate Return On Equity?

ROE can be calculated by using the formula:

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

So, based on the above formula, the ROE for Imaspro Corporation Berhad is:

6.5% = RM8.3m ÷ RM127m (Based on the trailing twelve months to September 2022).

The 'return' is the income the business earned over the last year. That means that for every MYR1 worth of shareholders' equity, the company generated MYR0.06 in profit.

What Is The Relationship Between ROE And Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. 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.

Imaspro Corporation Berhad's Earnings Growth And 6.5% ROE

At first glance, Imaspro Corporation Berhad's ROE doesn't look very promising. Next, when compared to the average industry ROE of 8.6%, the company's ROE leaves us feeling even less enthusiastic. Imaspro Corporation Berhad was still able to see a decent net income growth of 19% over the past five years. So, the growth in the company's earnings could probably have been caused by other variables. Such as - high earnings retention or an efficient management in place.

We then performed a comparison between Imaspro Corporation Berhad's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 23% in the same period.

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 Imaspro Corporation Berhad's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Imaspro Corporation Berhad Using Its Retained Earnings Effectively?

The high three-year median payout ratio of 54% (or a retention ratio of 46%) for Imaspro Corporation Berhad suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Besides, Imaspro Corporation Berhad has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders.

Conclusion

On the whole, we do feel that Imaspro Corporation Berhad has some positive attributes. That is, quite an impressive growth in earnings. However, the low profit retention means that the company's earnings growth could have been higher, had it been reinvesting a higher portion of its profits. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of Imaspro Corporation Berhad's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

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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