Does Dufu Technology Corp. Berhad’s (KLSE:DUFU) Weak Fundamentals Mean That The Market Could Correct Its Share Price?

Dufu Technology Berhad’s (KLSE:DUFU) stock is up by a considerable 17% over the past three months. However, we decided to pay close attention to its weak financials as we are doubtful that the current momentum will keep up, given the scenario. Particularly, we will be paying attention to Dufu Technology Berhad’s ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

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ROE 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 Dufu Technology Berhad is:

7.1% = RM25m ÷ RM352m (Based on the trailing twelve months to March 2025).

The ‘return’ is the profit over the last twelve months. So, this means that for every MYR1 of its shareholder’s investments, the company generates a profit of MYR0.07.

See our latest analysis for Dufu Technology Berhad

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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.

When you first look at it, Dufu Technology Berhad’s ROE doesn’t look that attractive. However, its ROE is similar to the industry average of 6.1%, so we won’t completely dismiss the company. But then again, Dufu Technology Berhad’s five year net income shrunk at a rate of 20%. Remember, the company’s ROE is a bit low to begin with. Hence, this goes some way in explaining the shrinking earnings.

That being said, we compared Dufu Technology Berhad’s performance with the industry and were concerned when we found that while the company has shrunk its earnings, the industry has grown its earnings at a rate of 5.3% in the same 5-year period.

KLSE:DUFU Past Earnings Growth July 14th 2025

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock’s future looks promising or ominous. Is Dufu Technology Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.