The majority of readers are likely already aware of Bell Food Group's (VTX: BELL) stock's 6.0% three-month gain. We chose to research the company's main financial indicators because of its excellent performance since a company's long-term fundamentals often determine market outcomes. We choose to concentrate on Bell Food Group's ROE in this piece.
Return on equity, often known as ROE, is a helpful metric for determining how well a business can create returns on the investmentsit has received from its shareholders. In other words, it shows how well the business is doing at generating returns on shareholder capital.
The following formula may be used to determine ROE:
- Net profit (from ongoing activities) minus shareholders' equity equals return on equity.
- In light of the aforementioned calculation, Bell Food Group's ROE is as follows:
- 9.2% = CHF134m ÷ CHF1.5b (Based on the trailing twelve months to June 2023).
- The revenue the company made during the previous year is the "return." This implies that the firm makes a profit of CHF0.09 for every CHF1 invested by its shareholders.
As of now, we know that ROE is a gauge of a business's profitability. We may then determine a company's potential for earnings growth based on how well and how much of these profits it reinvests, or "retains". In general, companies with a high return on equity and profit retention expand more quickly than those without these characteristics, everything else being equal.
First off, Bell Food Group seems to have a solid ROE. Even yet, we aren't too thrilled when compared to the average industry ROE of 13%. However, Bell Food Group's modest 14% net income increase over the last five years is unquestionably a plus. Therefore, there may be other factors that are favorably affecting profit growth. For instance, the business is managed well or has a low payout ratio. Keep in mind that the company's ROE is reasonable. Simply put, the ROE for the sector is greater. Thus, this also adds some context to the company's very rapid profits growth.
Next, we compared Bell Food Group's net income growth to that of the industry, and gratifyingly, we discovered that the company's growth was more than the sector's 5.3% average growth rate.
When evaluating a business, earnings growth is a crucial factor to take into account. The investor should attempt to determine if the predicted profits increase or reduction, as the case may be, is already priced in. They may then use this to evaluate if the stock is set up for a promising or gloomy future. Has the market factored in BELL's future prospects?
As we showed above, Bell Food Group has a fair level of earnings growth and a healthy mix of a modest three-year median payout ratio of 34% (or a retention ratio of 66%), indicating that the firm has been effectively using its profits.
In addition, Bell Food Group has paid dividends for at least 10 years or longer. This demonstrates the firm's dedication to returning earnings to shareholders. Our most recent data from analysts indicates that the company's anticipated future payout ratio over the next three years will be about 31%. As a result, experts forecast that the company's future ROE will likewise not alter much, coming in at 8.1%.
We are generally satisfied with Bell Food Group's performance. We particularly appreciate the fact that it has been expanding earnings by reinvesting a sizable amount of its profits at a reasonable rate of return. However, despite the company's previous profits growing, according to the most recent expert predictions, the company's future earnings will decline.