![]() Revolve Group doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. Is Revolve Group Making Efficient Use Of Its Profits? So this certainly also provides some context to the high earnings growth seen by the company. ![]() However, not to forget, the company does have a decent ROE to begin with, just that it is lower than the industry average. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio. We reckon that there could be other factors at play here. However, we are pleased to see the impressive 48% net income growth reported by Revolve Group over the past five years. Yet, the fact that the company's ROE is lower than the industry average of 21% does temper our expectations. To start with, Revolve Group's ROE looks acceptable. A Side By Side comparison of Revolve Group's Earnings Growth And 15% ROE 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. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. So far, we've learned that ROE is a measure of a company's profitability. What Has ROE Got To Do With Earnings Growth? Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.15 in profit. The 'return' refers to a company's earnings over the last year. So, based on the above formula, the ROE for Revolve Group is:ġ5% = US$59m ÷ US$380m (Based on the trailing twelve months to December 2022). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity View our latest analysis for Revolve Group How Is ROE Calculated? Simply put, it is used to assess the profitability of a company in relation to its equity capital. ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Particularly, we will be paying attention to Revolve Group's ROE today. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. With its stock down 26% over the past three months, it is easy to disregard Revolve Group (NYSE:RVLV).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |