close
close

Is Techbond Group Berhad’s (KLSE:TECHBND) recent stock performance tied to its strong fundamentals?

Techbond Group Berhad (KLSE:TECHBND) has had a great run on the stock market, with shares up a significant 28% over the past three months. Given that the market rewards strong financial values ​​over the long term, we wonder if that is the case in this case. In this article, we decided to focus on Techbond Group Berhad’s ROE.

Return on equity or ROE is an important measure used to assess how efficiently a company’s management is using the company’s capital. In simpler terms, it measures a company’s profitability relative to its shareholders’ equity.

See our latest analysis for Techbond Group Berhad

How to calculate return on equity?

Return on equity can be calculated using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Techbond Group Berhad is:

9.3% = RM17mil RM180mil (based on trailing twelve months to March 2024).

The ‘return’ is the profit over the past twelve months. Another way to think of that is that for every MYR1 of equity, the company was able to make MYR0.09 in profit.

Why is ROE important for earnings growth?

We’ve already established that ROE serves as an efficient profit-generating measure of a company’s future earnings. Based on how much of its profits the company decides to reinvest or “retain”, we can then evaluate a company’s future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones with a higher growth rate compared to companies that don’t have the same features.

Techbond Group Berhad earnings growth and 9.3% ROE

At first glance, Techbond Group Berhad’s ROE doesn’t look promising. However, the fact that the company’s ROE is higher than the industry average ROE of 6.0% is certainly interesting. This probably explains, among other things, Techbond Group Berhad’s moderate growth of 11% over the past five years. That said, the company has a somewhat low ROE to start with, only it is higher than the industry average. So there may be other aspects that cause profits to grow. For example, the company has a low payout ratio or may belong to a fast-growing industry.

As a next step, we compared Techbond Group Berhad’s net income growth with the industry, and we were pleased to find that the growth observed by the company is higher than the average industry growth of 7.7%.

KLSE:TECHBND Past Earnings Growth June 20, 2024

The basis for assigning value to a company is largely linked to profit growth. What investors need to determine next is whether expected earnings growth, or lack thereof, is already built into the stock price. This then helps them determine whether the stock has a bright or bleak future. Is Techbond Group Berhad fairly valued compared to other companies? These 3 valuation measures can help you decide.

Is Techbond Group Berhad using its profits efficiently?

Techbond Group Berhad has a healthy combination of a moderate three-year average payout ratio of 28% (or a retention rate of 72%) and respectable earnings growth, as we saw above, meaning the company has been making efficient use of its profits.

In addition, Techbond Group Berhad pays dividends over a period of five years. This shows that the company is committed to sharing profits with its shareholders.

Conclusion

Overall, we are quite satisfied with Techbond Group Berhad’s performance. It’s especially great to see that the company has seen significant earnings growth, supported by a respectable ROE and a high reinvestment rate. That said, the latest analyst forecasts show that the company will continue to see an increase in its profits. To learn more about the latest analyst forecasts for the company, check out this visualization of analyst forecasts for the company.

Valuation is complex, but we help make it simple.

Find out if Techbond Group Berhad is potentially over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

Do you have feedback on this article? Worried about the content? Please contact us directly from us. You can also email the editorial team (at) Simplywallst.com.

This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.

Valuation is complex, but we help make it simple.

Find out if Techbond Group Berhad is potentially over or undervalued by checking out our comprehensive analysis, including: fair value estimates, risks and cautions, dividends, insider transactions and financial health.

View the Free Analysis

Do you have feedback on this article? Worried about the content? Please contact us directly. You can also send an email to [email protected]