Sunview Group Berhad's (KLSE:SUNVIEW) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
We've discovered 2 warning signs about Sunview Group Berhad. View them for free.
How Is ROE Calculated?
Return on equity can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Sunview Group Berhad is:
5.7% = RM9.9m ÷ RM174m (Based on the trailing twelve months to December 2024).
The 'return' is the profit over the last twelve months. Another way to think of that is that for every MYR1 worth of equity, the company was able to earn MYR0.06 in profit.
See our latest analysis for Sunview Group Berhad
Why Is ROE Important For Earnings Growth?
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.
Sunview Group Berhad's Earnings Growth And 5.7% ROE
When you first look at it, Sunview Group Berhad's ROE doesn't look that attractive. We then compared the company's ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 7.9%. Although, we can see that Sunview Group Berhad saw a modest net income growth of 15% over the past five years. So, there might be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.
We then performed a comparison between Sunview Group Berhad's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 16% in the same 5-year period.
KLSE:SUNVIEW Past Earnings Growth May 7th 2025
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. One 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 prospects. So, you may want to check if Sunview Group Berhad is trading on a high P/E or a low P/E, relative to its industry.
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