Most readers already know that the stock of Otsuka Information Technology (GTSM: 3570) has increased significantly by 11% in the past three months. Given the company’s impressive performance, we decided to take a closer look at its financial metrics because a company’s long-term financial health usually dictates market results. In this article, we have decided to focus on the ROE of Otsuka Information Technology.
Return on equity or ROE is a key metric used to assess the efficiency with which the management of a business is using business capital. Simply put, it is used to assess a company’s profitability against its equity.
Check out our latest analysis for Otsuka Information Technology
How do you calculate return on equity?
the ROE formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE for Otsuka Information Technology is:
19% = NT $ 136 million ÷ NT $ 704 million (based on the last twelve months up to December 2020).
The “return” is the profit of the last twelve months. Another way to think about this is that for every net worth of NT $ 1, the company was able to earn NT $ 0.19 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 the portion of its profits that the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Assuming everything else is equal, companies that have both a higher return on equity and higher profit retention are generally those that have a higher growth rate compared to companies that do not. the same characteristics.
Otsuka Information Technology profit growth and ROE of 19%
For starters, Otsuka Information Technology’s ROE seems acceptable. Additionally, the company’s ROE compares quite favorably to the industry average of 12%. This certainly adds context to Otsuka Information Technology’s exceptional 20% net profit growth over the past five years. We believe there could be other factors at play here as well. For example, it is possible that the management of the company has made good strategic decisions or that the company has a low payout rate.
Second, we compared Otsuka Information Technology’s net income growth to that of the industry and found that the company had a similar growth figure compared to the industry’s average growth rate of 25%. during the same period.
Profit growth is an important metric to consider when valuing a stock. The investor should try to determine whether the expected growth or decline in earnings, whatever the case, is taken into account. This then helps them determine whether the action is set for a bright or gloomy future. Is Otsuka’s information technology valued fairly compared to other companies? These 3 evaluation measures could help you make a decision.
Is Otsuka’s Information Technology Using Its Profits Effectively?
Otsuka Information Technology’s sizable three-year median payout ratio of 63% (where it only retains 37% of its revenue) suggests the company has been able to achieve strong profit growth despite the return. of most of its income to shareholders.
In addition, Otsuka Information Technology has paid dividends over a period of seven years, which means the company is very serious about sharing its profits with its shareholders.
Overall, we believe that Otsuka Information Technology’s performance has been quite good. In particular, his high ROE is quite remarkable and also the probable explanation behind his considerable growth in earnings. Yet the company retains a small portion of its profits. Which means the company was able to grow their profits despite this, so it’s not too bad. So far, we’ve only had a brief discussion of how the company’s earnings grow. You can do your own research on Otsuka’s information technology and see how it behaved in the past by watching this FREE detailed graphic past earnings, income and cash flow.
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