Nine Entertainment Holdings’s (ASX: NEC) was up +4.6% for the week. Considering that stock prices are often related to a company’s long-term performance, we decided to investigate whether the company’s good financial performance contributed to recent price movements. In particular, we decided to study Nine Entertainment Holdings’ ROE in this article.
Return on Equity or ROE is a measure of how well a company is growing its value and managing investors’ money. Simply put, ROE shows how much profit each dollar generates relative to the value of the shares.
View and view all Nine Entertainment Holdings Limited proposals in real time
How Do You Calculate Return On Equity?
ROE can be calculated using the following formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
Therefore, based on the above formula, the ROE for Nine Entertainment Holdings is:
15% = AU$315m ÷ AU$2.1b (Based on the next twelve months to June 2022).
‘Returns’ are people’s income after tax in the last twelve months. This means that for every A$1 invested, the company makes a profit of A$0.15.
How Does ROE Relate to Earnings Growth?
We have already established that ROE serves as a measure of profitability for a company’s future earnings. Based on how much of these profits the company has returned or “saved”, and how well it performs, we can assess the growth of the company. In general, other things being equal, companies that achieve high financial returns and retain profits, have higher risk than companies that do not share these values.
Nine Entertainment Holdings ‘Earnings’ Growth and 15% ROE
First off, Nine Entertainment Holdings seems to have a good ROE. Compared to the industry’s average ROE of 9.5% the company’s ROE looks very impressive. Despite this, Nine Entertainment Holdings’ five-year growth rate was the lowest in the past five years. We feel that there may be other factors at play here that limit the growth of the company. Like, the company pays out a large portion of its earnings as dividends, or faces competitive challenges.
We then compared the growth of Nine Entertainment Holdings’ total revenue to the industry, which showed that the company’s growth is similar to the industry’s growth rate of 0.5% over the same period.
Economic growth is a major factor in stock valuation. It is important for an investor to know whether the market is overpriced for the company’s profit growth (or decline). By doing this, he will have an idea if the cargo is going to the clear blue water or if the water is waiting. If you’re wondering about the value of Nine Entertainment Holdings, take a look at this price-to-value ratio, compared to its peers.
Is Nine Entertainment Holdings Making Good Use of Its Profits?
With a three-year average interest rate of 91% (meaning that the company keeps only 9.4% of its income) of its business to return to its business), the main profit of Nine Entertainment Holdings is being distributed to its owners, which explains. lack of blood sugar levels.
In addition, Nine Entertainment Holdings has been paying dividends for eight years which shows that maintaining the dividend payout is very important to the management even if it depends on the growth of the business. Current forecasts indicate that the company’s interest rate is expected to drop to 70% over the next three years. However, the company’s ROE is not expected to change significantly despite the expected small increase.
The end
Overall, we feel that Nine Entertainment Holdings has a positive outlook. The company has steadily grown its earnings thanks to its impressive ROE. However, the business still retains all profits. This can have a negative impact on the growth of the company. With that said, the latest forecasts from industry analysts indicate that the company’s earnings are expected to rise. To learn more about the company’s latest predictions, check out this company’s future outlook.
Counting is hard, but we’re helping make it easy.
Find out if Opinions of the company Nine Entertainment Holdings it is possible to increase or decrease it by looking at our full analysis, which includes cost estimates, risks and warnings, benefits, internal affairs and financial health.
See Free Analysis
Have a comment on this story? Worried about content? Contact each other and us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is more general in nature. We provide reviews based on historical data and expert forecasts using unbiased methods and our articles are not intended to be financial advice. It does not make recommendations to buy or sell any stock, and does not take into account your goals, or financial situation. We want to bring you long-term analytics driven by meaningful data. Note that our analysis may not be influenced by recent company announcements or stock prices. Simply Wall St has no position in any of the listed stocks.
