Most readers would already know that Hil Industries Berhad’s (KLSE:HIL) stock increased by 2.6% over the past month. As most would know, long-term fundamentals have a strong correlation with market price movements, so we decided to look at the company’s key financial indicators today to determine if they have any role to play in the recent price movement. Particularly, we will be paying attention to Hil Industries Berhad’s ROE today.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company’s success at turning shareholder investments into profits.
A Side By Side comparison of Hil Industries Berhad’s Earnings Growth And 7.0% ROE
At first glance, Hil Industries Berhad’s ROE doesn’t look very promising. However, given that the company’s ROE is similar to the average industry ROE of 7.0%, we may spare it some thought. Having said that, Hil Industries Berhad has shown a modest net income growth of 12% over the past five years. Given the slightly low ROE, it is likely that there could be some other aspects that are driving this growth. Such as – high earnings retention or an efficient management in place.
Given that the industry shrunk its earnings at a rate of 1.2% in the same period, the net income growth of the company is quite impressive.
Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. If you’re wondering about Hil Industries Berhad’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Is Hil Industries Berhad Efficiently Re-investing Its Profits?
Hil Industries Berhad has a three-year median payout ratio of 27%, which implies that it retains the remaining 73% of its profits. This suggests that its dividend is well covered, and given the decent growth seen by the company, it looks like management is reinvesting its earnings efficiently.
Moreover, Hil Industries Berhad is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.
In total, it does look like Hil Industries Berhad has some positive aspects to its business. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business.
Research reference and analysis by Simplywallst
Published by Zack Baharum