<!-- HTML_TAG_START -->NasdaqCM:YIBO Past Earnings Growth December 22nd 2024<!-- HTML_TAG_END -->
Planet Image International’s (NASDAQ:YIBO) stock is up by a considerable 30% 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. Particularly, we will be paying attention to Planet Image International’s ROE today.
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.
View our latest analysis for Planet Image International
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Planet Image International is:
15% = US$8.1m ÷ US$54m (Based on the trailing twelve months to June 2024).
The ‘return’ is the yearly profit. One way to conceptualize this is that for each $1 of shareholders’ capital it has, the company made $0.15 in profit.
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.
To start with, Planet Image International’s ROE looks acceptable. Especially when compared to the industry average of 11% the company’s ROE looks pretty impressive. Yet, Planet Image International has posted measly growth of 4.4% over the past five years. That’s a bit unexpected from a company which has such a high rate of return. Such a scenario is likely to take place when a company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
As a next step, we compared Planet Image International’s net income growth with the industry and were disappointed to see that the company’s growth is lower than the industry average growth of 9.2% in the same period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is Planet Image International fairly valued compared to other companies? These 3 valuation measures might help you decide.
