Most readers would already know that Hakuhodo DY Holdings’ (TSE:2433) stock increased by 7.6% over the past three months. However, the company’s financials look a bit inconsistent and market outcomes are ultimately driven by long-term fundamentals, meaning that the stock could head in either direction. In this article, we decided to focus on Hakuhodo DY Holdings’ 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. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
How Do You Calculate Return On Equity?
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 Hakuhodo DY Holdings is:
4.3% = JP¥17b ÷ JP¥395b (Based on the trailing twelve months to September 2025).
The ‘return’ is the yearly profit. Another way to think of that is that for every Â¥1 worth of equity, the company was able to earn Â¥0.04 in profit.
View our latest analysis for Hakuhodo DY Holdings
What Is The Relationship Between ROE And Earnings Growth?
So far, we’ve learned that ROE is a measure of a company’s profitability. 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 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.
Hakuhodo DY Holdings’ Earnings Growth And 4.3% ROE
On the face of it, Hakuhodo DY Holdings’ ROE is not much to talk about. A quick further study shows that the company’s ROE doesn’t compare favorably to the industry average of 9.5% either. For this reason, Hakuhodo DY Holdings’ five year net income decline of 15% is not surprising given its lower ROE. We reckon that there could also be other factors at play here. For example, it is possible that the business has allocated capital poorly or that the company has a very high payout ratio.
So, as a next step, we compared Hakuhodo DY Holdings’ performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 8.5% over the last few years.
TSE:2433 Past Earnings Growth January 12th 2026
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. This then helps them determine if the stock is placed for a bright or bleak future. If you’re wondering about Hakuhodo DY Holdings”s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Is Hakuhodo DY Holdings Efficiently Re-investing Its Profits?
Despite having a normal three-year median payout ratio of 46% (where it is retaining 54% of its profits), Hakuhodo DY Holdings has seen a decline in earnings as we saw above. It looks like there might be some other reasons to explain the lack in that respect. For example, the business could be in decline.
Moreover, Hakuhodo DY Holdings has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth.
Summary
In total, we’re a bit ambivalent about Hakuhodo DY Holdings’ performance. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. With that said, we studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future. To know more about the company’s future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
Discover if Hakuhodo DY Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.