Has PLS Plantations Berhad's (KLSE:PLS) Impressive Stock Performance Got Anything To Do With Its Fundamentals?
PLS Plantations Berhad ( KLSE:PLS ) has been a strong player in the stock market, posting a 17% gain over the past month. As many people know, fundamentals are the main determinant of long-term market price movements, so today we decided to take a look at the main financial indicators of companies to see what role they have played in recent price movements. . In this article, we have decided to focus on the ROE of PLS Plantations Berhad.
ROE, or return on equity, is a useful tool for evaluating how effectively a company can generate the return on investment it receives from shareholders. In other words, it shows the company's success in turning its capital investment into profit.
Discover our latest analysis of PLS Plantations Berhad
How is ROE calculated?
Return on Equity Formula : -
Return on equity = net income (from continuing operations) ÷ shareholders' equity
So, based on the formula above, the ROE for PLS Plantations Berhad is:
8.1% = RM27 million ÷ RM332 million (based on the twelve months to September 2022).
The 'return' is the annual profit. Therefore, this means that for every MYR invested by shareholders, the company earns MYR 0.08 in return.
What is the relationship between ROE and earnings growth?
So far we have learned that ROE is a measure of a company's profitability. We can measure a company's ability to generate future earnings by the amount of earnings it chooses to reinvest, or "hold." Other things being equal, companies with high returns on capital and high profits tend to have higher growth rates than companies without these same characteristics.
Side-by-side comparison of PLS Plantations Berhad and ROE revenue growth of 8.1%
There is apparently not much to say about the ROE of PLS Plantations Berhad. So compared to the industry average ROE of 10%, the company's ROE makes us more optimistic. Despite this, PLS Plantations Berhad has shown impressive net income growth of 54% over the past five years. Therefore, there could be another reason behind this development. Similar: High Revenue Retention or Effective On-Site Management.
In the next step, when presenting the PLS Plantations Berhad net income growth to the industry, it is interesting to note that the company's growth was 13% higher than the industry growth average.
Revenue growth is an important metric to consider when evaluating stocks. It is important for investors to know whether the market values the expected growth (or decline) in a company's earnings. This will help you determine if the title's future looks bright or bleak. If you're interested in the valuation of PLS Plantations Berhad, check out this measure of its price-earnings ratio relative to the industry.
Does PLS Plantations Berhad really reinvest its earnings?
PLS Plantations Berhad does not pay dividends to shareholders, which means that the company invests all its profits in the business. This is likely what is driving the high revenue growth rates discussed above.
Summary
Overall, we believe that PLS Plantations Berhad has some positives to consider. Despite the low returns, there is no doubt that the company has reinvested very high profits in the business, contributing to strong revenue growth. Although we are not leaving the business completely, we are trying to determine the level of risk in the business in order to make the right decisions about the business. You can review the 1 risks we have identified for PLS Plantations Berhad here on our platform by accessing our free risk dashboard .
Comments on this article? Worried about the content? Contact us directly . You can also email the editorial team (at) simplewallst.com.
This Simply Wall St article is general in nature. We provide opinions based solely on historical data and analyst forecasts using unbiased methodology, and our articles are not intended to be financial advice. It does not advise you to buy or sell shares and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Please note that our analysis may not include ads from price-sensitive companies or quality material. Simply put, Wall St. has no position in any of the listed stocks.
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