Does the impressive stock market performance of JLT Mobile Computers AB (publ) (STO: JLT) have something to do with its fundamentals?
JLT Mobile Computers (STO: JLT) shares have risen 17% over the past week. Since stock prices are generally aligned with a company’s long-term financial performance, we decided to take a closer look at its financial metrics to see if they had a role to play in the recent price movement. . In this article, we have decided to focus on the ROE of JLT Mobile Computers.
Return on equity or ROE is an important factor for a shareholder to consider because it tells them how effectively their capital is being reinvested. In other words, it reveals the company’s success in turning shareholders’ investments into profits.
See our latest review for JLT mobile computers
How to calculate return on equity?
The return on equity formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE of JLT laptops is:
10% = 6.2m kr 59m kr (based on the last twelve months up to September 2021).
The “return” is the income the business has earned over the past year. This therefore means that for each SEK1 of the investments of its shareholder, the company generates a profit of SEK0.10.
What is the relationship between ROE and profit growth?
So far we’ve learned that ROE is a measure of a company’s profitability. We now need to assess how much profit the company is reinvesting or “holding back” for future growth, which then gives us an idea of the growth potential of the company. 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.
A side-by-side comparison of JLT Mobile Computers’ profit growth and 10% ROE
For starters, JLT Mobile Computers seems to have a respectable ROE. Compared to the industry’s average ROE of 7.9%, the company’s ROE looks quite remarkable. As you might expect, the 12% drop in net income reported by JLT Mobile Computers is a bit of a surprise. Based on this, we believe that there might be other reasons that have not been discussed so far in this article that may be hampering the growth of the business. For example, the company may have a high payout ratio or the company may have misallocated capital, for example.
In the next step, we compared the performance of JLT Mobile Computers with the industry and found that the performance of JLT Mobile Computers is depressing even when compared to the industry, which decreased its profits by 4.2% in the past. during the same period, which is a slower than the company.
Profit growth is a huge factor in the valuation of stocks. 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. Is JLT Mobile Computers valued enough compared to other companies? These 3 evaluation measures could help you decide.
Is JLT Mobile Computers Using Profits Efficiently?
With a high median payout rate of 52% over three years (implying that 48% of profits are retained), most of JLT Mobile Computers’ profits go to shareholders, which explains the company’s decline in profits. With only a little money reinvested in the business, earnings growth would obviously be little or no. To learn about the 2 risks we have identified for JLT laptops, visit our free risk dashboard.
Additionally, JLT Mobile Computers has paid dividends over an eight-year period, suggesting that sustaining dividend payments is preferred by management even when earnings are declining.
Overall, we think JLT Mobile Computers definitely has some positive factors to consider. However, we are disappointed to see a lack of earnings growth despite a high ROE. Keep in mind that the company reinvests a small portion of its profits, which means investors do not reap the benefits of the high rate of return. So far, we’ve only done a brief review of the company’s growth data. You can do your own research on JLT mobile computers and see how they have performed in the past by checking out this FREE detailed graphic past earnings, income and cash flow.
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 shares 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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