MIND Technology (NASDAQ:MIND) has had a great run on the share market with its stock up by a significant 149% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on MIND Technology’s ROE.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. Put another way, it reveals the company’s success at turning shareholder investments into profits.
View our latest analysis for MIND Technology
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 MIND Technology is:
18% = US$4.5m ÷ US$25m (Based on the trailing twelve months to October 2024).
The ‘return’ is the income the business earned over the last year. That means that for every $1 worth of shareholders’ equity, the company generated $0.18 in profit.
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.
To start with, MIND Technology’s ROE looks acceptable. Further, the company’s ROE compares quite favorably to the industry average of 14%. Probably as a result of this, MIND Technology was able to see an impressive net income growth of 27% over the last five years. However, there could also be other causes behind this growth. Such as – high earnings retention or an efficient management in place.
We then compared MIND Technology’s net income growth with the industry and found that the company’s growth figure is lower than the average industry growth rate of 52% in the same 5-year period, which is a bit concerning.
NasdaqCM:MIND Past Earnings Growth January 26th 2025
Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. If you’re wondering about MIND Technology’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
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