<!-- HTML_TAG_START -->NasdaqGS:EXE Past Earnings Growth December 21st 2024<!-- HTML_TAG_END -->
Expand Energy’s (NASDAQ:EXE) stock is up by a considerable 21% over the past three months. Given that stock prices are usually aligned with a company’s financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. In this article, we decided to focus on Expand Energy’s ROE.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
See our latest analysis for Expand Energy
ROE can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Expand Energy is:
2.5% = US$254m ÷ US$10b (Based on the trailing twelve months to September 2024).
The ‘return’ is the profit over the last twelve months. So, this means that for every $1 of its shareholder’s investments, the company generates a profit of $0.02.
So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. 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.
It is quite clear that Expand Energy’s ROE is rather low. Even compared to the average industry ROE of 15%, the company’s ROE is quite dismal. However, we we’re pleasantly surprised to see that Expand Energy grew its net income at a significant rate of 41% in the last five years. We reckon that there could be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.
We then performed a comparison between Expand Energy’s net income growth with the industry, which revealed that the company’s growth is similar to the average industry growth of 40% in the same 5-year period.
Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them establish if the stock’s future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Expand Energy is trading on a high P/E or a low P/E, relative to its industry.
