Does the impressive performance of Bijou Brigitte modische Accessoires Aktiengesellschaft (ETR:BIJ) shares have something to do with its fundamentals?

Most readers will already know that shares of Bijou Brigitte Modische Accessories (ETR:BIJ) are up a significant 21% over the past three months. We wonder if and what role company finances play in this price change, as a company’s long-term fundamentals usually dictate market outcomes. Specifically, we decided to study the ROE of Bijou Brigitte modische Accessoires in this article.

Return on equity or ROE is a key metric used to gauge how effectively a company’s management is using the company’s capital. In simple terms, it is used to assess the profitability of a company in relation to its equity.

Discover our latest analysis for Bijou Brigitte modische Accessories

How is ROE calculated?

Return on equity can be calculated using the formula:

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

So, based on the above formula, the ROE for Bijou Brigitte modische Accessoires is:

8.0% = €17m ÷ €213m (based on the last twelve months until December 2021).

“Yield” refers to a company’s earnings over the past year. Another way to think about this is that for every €1 of equity, the company was able to make €0.08 of profit.

Why is ROE important for earnings growth?

So far we have learned that ROE is a measure of a company’s profitability. Depending on how much of its profits the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and earnings retention, the higher a company’s growth rate compared to companies that don’t necessarily exhibit these characteristics.

Earnings growth for Bijou Brigitte modische Accessories and ROE of 8.0%

For starters, the ROE of Bijou Brigitte modische Accessoires seems acceptable. Regardless, the company’s ROE is still well below the industry average of 17%. In addition, the net profit of Bijou Brigitte modische Accessoires has decreased by 43% over the past five years. Keep in mind that the company has a high ROE. It’s just that the industry’s ROE is higher. So there could be other reasons why profits are falling. For example, the company may have a high payout ratio or the company may have misallocated capital, for example.

However, when we compared the growth of Bijou Brigitte modische Accessories with the industry, we found that although company profits declined, the industry saw profit growth of 1.7% during of the same period. It’s quite worrying.

XTRA: BIJ Past Earnings Growth July 19, 2022

Earnings growth is an important factor in stock valuation. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. By doing so, he will get an idea if the title is heading for clear blue waters or if swampy waters await. A good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings outlook. So, you might want to check if Bijou Brigitte modische Accessoires is trading on a high P/E or a low P/E, relative to its industry.

Does Bijou Brigitte Modische Accessories effectively reinvest its profits?

Although the company has paid a portion of its dividend in the past, it currently does not pay any dividend. This implies that potentially all of its profits are reinvested in the business.

Conclusion

All in all, it seems that Bijou Brigitte modische Accessoires has some positive aspects to her business. However, we are disappointed to see a lack of earnings growth, even despite a moderate ROE and high reinvestment rate. We believe there could be external factors that could negatively impact the business. So far, we have only had a brief discussion of corporate earnings growth. So it might be worth checking that out. free detailed graph past revenue from Bijou Brigitte Modische Accessories, as well as revenue and cash flow to get a deeper insight into the performance of the business.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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