Cue Energy Resources’ (ASX:CUE) stock up by 4.5% over the past week. Given that the stock prices usually follow long-term business performance, we wonder if the company’s mixed financials could have any adverse effect on its current price price movement In this article, we decided to focus on Cue Energy Resources’ ROE.
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.
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Cue Energy Resources is:
11% = AU$6.3m ÷ AU$58m (Based on the trailing twelve months to June 2025).
The ‘return’ is the profit over the last twelve months. Another way to think of that is that for every A$1 worth of equity, the company was able to earn A$0.11 in profit.
See our latest analysis for Cue Energy Resources
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 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, Cue Energy Resources’ ROE doesn’t look that attractive. Yet, a closer study shows that the company’s ROE is similar to the industry average of 11%. Particularly, the exceptional 37% net income growth seen by Cue Energy Resources over the past five years is pretty remarkable. Taking into consideration that the ROE is not particularly high, we reckon that there could also be other factors at play which could be influencing the company’s growth. For instance, the company has a low payout ratio or is being managed efficiently.
We then compared Cue Energy Resources’ net income growth with the industry and we’re pleased to see that the company’s growth figure is higher when compared with the industry which has a growth rate of 26% in the same 5-year period.
