Ten Square Games (WSE:TEN) had a tough month with a 29% decline in its share price. Yet, if you pay close attention, you may notice that the company’s excellent financials suggest that the stock might potentially improve in value over the long run, given that markets often reward firms with strong financial health. In particular, we choose to examine Ten Square Games’ ROE in this paper.
Return on Equity, or ROE, is a measure of a company’s ability to create shareholder value and manage investment funds. Simply expressed, it is used to evaluate a company’s profitability in proportion to its equity capital.
How is ROE Determined?
ROE can be computed using the following formula:
Return on Equity is Net Profit (from ongoing operations) divided by Shareholder Equity.
Thus, based on the preceding methodology, Ten Square Games’s ROE is:
25% = zł90m ÷ zł354m (Based on the trailing twelve months to December 2022). (Based on the trailing twelve months to December 2022).
The’return’ is the profit made over the last year. One way to think about this is that the firm earned PLN0.25 for every PLN1 in shareholder capital.
What is the connection between return on equity and earnings growth?
As previously discussed, ROE is a measure of a company’s profitability. The percentage of a company’s profits that it decides to reinvest or “retain” allows us to assess its future capacity to make profits. Companies with a better return on equity and higher profit retention tend to have a faster growth rate than firms that lack these characteristics, assuming all other factors are equal.
Comparative analysis of Ten Square Games’s Earnings Growth and 25% ROE
Ten Square Games has a rather high ROE, which is intriguing. Moreover, the company’s ROE is above the industry average of 17%, which is pretty outstanding. Thus, Ten Square Games’ extraordinary 34% net income increase over the previous five years is not surprising.
Comparing Ten Square Games’ net income growth to that of the industry, we discovered that the company’s claimed growth is comparable to the industry’s average growth rate of 29% for the same time period.
When assessing a firm, earnings growth is an important factor to consider. An investor must determine if the market has priced in the company’s anticipated profits growth (or decline). By doing so, investors will be able to determine if the stock is going for clear blue seas or murky waters. If you are curious in the valuation of Ten Square Games, consider its price-to-earnings ratio relative to its industry.Is Ten Square Gaming Reinvesting Its Earnings Efficiently?
The median payout ratio for Ten Square Gaming for the past three years is 45%, which is relatively low. The remaining 55% is retained by the corporation. The dividend appears to be well covered, and Ten Square Games is reinvesting its profits effectively, as indicated by the company’s remarkable growth noted above.
In addition, Ten Square Games is committed to continuing to distribute profits to shareholders, as seen by its four-year dividend history. In the following three years, the company’s prospective payout ratio is projected to increase to 62%, based on the most recent analyst consensus data. Nonetheless, the company’s ROE is not anticipated to alter much despite the anticipated increase in payout ratio.
Summary
Overall, we’re quite pleased with Ten Square Games’ performance. Especially, we like that the firm reinvests a substantial portion of its revenues at a high rate of return. This has resulted in a huge increase in the company’s earnings. In light of this, a review of the most recent analyst projections indicates that the company’s future profits growth is anticipated to decelerate. Are these analysts’ projections based on industry-wide projections or on the company’s fundamentals? Here you will find our analysts’ projections for the firm.