Does his finances have a role to play in increasing Air Partner plc (LON: AIR) inventories recently?

Air Partner (LON: AIR) had a strong run in the equity market with its share rising significantly 9.9% over the past month. As most know, fundamentals generally guide long-term market price movements, so we decided to look at the company’s key financial metrics today to see if they have a role to play in the recent one. price movement. Specifically, we have decided to study Air Partner’s ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate the returns on investment it has received from its shareholders. In simpler terms, it measures a company’s profitability relative to equity.

Check out our latest analysis for Air Partner

How do you calculate return on equity?

Return on equity can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

Thus, based on the above formula, the ROE for Air Partner is:

11% = £ 2.6million £ 23million (based on the last twelve months to July 2021).

The “return” is the amount earned after tax over the past twelve months. This means that for every £ 1 of equity, the company generated £ 0.11 in profit.

What is the relationship between ROE and profit growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. Based on how much of those profits the company reinvests or “withholds” and its efficiency, we are then able to assess a company’s profit growth potential. Assuming everything else remains the same, the higher the ROE and profit retention, the higher the growth rate of a business compared to businesses that don’t necessarily have these characteristics.

Growth in Air Partner profits and 11% ROE

At first glance, Air Partner appears to have a decent ROE. Especially compared to the industry average of 7.6%, the company’s ROE looks pretty impressive. It is probably because of this that Air Partner has been able to record a decent growth of 5.8% over the past five years.

We then performed a comparison between the growth of Air Partner’s net income with the industry, which found that the growth of the company is similar to the industry average growth of 5.8% over the course of the year. same period.

past profit growth

Profit growth is an important metric to consider when valuing a stock. It is important for an investor to know whether the market has factored in the expected growth (or decline) in company earnings. By doing this, they will have an idea if the stock is heading for clear blue waters or if swampy waters are waiting for them. If you’re wondering about Air Partner’s valuation, check out this gauge of its price / earnings ratio, relative to its industry.

Does Air Partner use its profits efficiently?

While Air Partner has a three-year median payout rate of 93% (meaning it retains 6.9% of profits), the company has still seen good profit growth in the past, which means that her high distribution rate did not hinder her ability to grow taller.

In addition, Air Partner has been paying dividends for at least ten years or more. This shows that the company is committed to sharing the profits with its shareholders. After studying the latest consensus data from analysts, we found that the company’s future payout ratio is expected to drop to 30% over the next three years. Thus, the expected drop in the payout ratio explains the expected increase in the company’s ROE to 22% over the same period.

Conclusion

Overall, we believe Air Partner has positive attributes. Especially the profit growth which was supported by an impressive ROE. Nonetheless, the high ROE could have been even more beneficial for investors if the company had reinvested more of its profits. As noted earlier, the current rate of reinvestment appears to be negligible. So far, we have only had a brief discussion about the company’s profit growth. To better understand Air Partner’s past earnings growth, check out this visualization of past earnings, revenue, and cash flow.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.


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