![]() ![]() Our risks dashboard would have the 2 risks we have identified for Spacenet Enterprises India. Wrapping up, we would proceed with caution with this company and one way of doing that would be to look at the risk profile of the business. The low earnings growth suggests our theory correct. 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. Overall, we have mixed feelings about Spacenet Enterprises India. For instance, the company's business may be deteriorating. So there could be some other explanations in that regard. Spacenet Enterprises India doesn't pay any dividend, meaning that potentially all of its profits are being reinvested in the business, which doesn't explain why the company's earnings have shrunk if it is retaining all of its profits. Is Spacenet Enterprises India Using Its Retained Earnings Effectively? If you're wondering about Spacenet Enterprises India's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. The basis for attaching value to a company is, to a great extent, tied to its earnings growth. NSEI:SPCENET Past Earnings Growth October 15th 2022 So, as a next step, we compared Spacenet Enterprises India's 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 22% in the same period. For example, the business has allocated capital poorly, or that the company has a very high payout ratio. We reckon that there could also be other factors at play here. Therefore, it might not be wrong to say that the five year net income decline of 19% seen by Spacenet Enterprises India was possibly a result of it having a lower ROE. Not just that, even compared to the industry average of 7.1%, the company's ROE is entirely unremarkable. It is quite clear that Spacenet Enterprises India's ROE is rather low. Spacenet Enterprises India's Earnings Growth And 4.8% ROE 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. 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. Thus far, we have learned that ROE measures how efficiently a company is generating its profits. What Has ROE Got To Do With Earnings Growth? That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.05 in profit. The 'return' refers to a company's earnings over the last year. So, based on the above formula, the ROE for Spacenet Enterprises India is:Ĥ.8% = ₹15m ÷ ₹311m (Based on the trailing twelve months to June 2022). Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity Return on equity can be calculated by using the formula: Put another way, it reveals the company's success at turning shareholder investments into profits.Ĭheck out the opportunities and risks within the IN Trade Distributors industry. 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. In this article, we decided to focus on Spacenet Enterprises India's ROE. However, we wonder if the company's inconsistent financials would have any adverse impact on the current share price momentum. Most readers would already be aware that Spacenet Enterprises India's (NSE:SPCENET) stock increased significantly by 199% over the past three months. ![]()
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