Should weakness in One Media iP Group Plc’s ( LON:OMIP ) stock be seen as a sign that the market will correct the share price given decent financials? | Techy Kings

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One Media iP Group (LON:OMIP) has had just over three months with its share price down 6.1%. However, the company’s fundamentals look pretty decent, and long-term financials are usually in line with future market price movements. In particular, we will pay attention to One Media iP Group’s ROE today.

Return on equity or ROE is a key metric used to assess how efficiently a company’s management is utilizing the company’s capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

See our latest analysis for One Media iP Group

How do you calculate return on equity?

The return on equity formula are:

Return on equity = Net profit (from continuing operations) ÷ Equity

So based on the above formula, the ROE of One Media iP Group is:

4.4% = UK£662k ÷ UK£15m (Based on last twelve months to April 2022).

The “return” is the profit over the last twelve months. So this means that for every £1 of the shareholder’s investment, the company generates a profit of £0.04.

What does ROE have to do with earnings growth?

We have already established that ROE serves as an effective profit-generating gauge of a company’s future performance. Based on how much of its profit the company chooses to reinvest or “keep”, we can then evaluate a company’s future ability to generate profit. Assuming all else is equal, companies that have both higher return on equity and higher earnings retention are usually the ones that have higher growth compared to companies that do not have the same characteristics.

One Media iP Group’s profit growth and 4.4% ROE

At first glance, One Media iP Group’s ROE doesn’t look very attractive. We then compared the company’s ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 9.1%. Despite this, One Media iP Group was able to increase its net profit significantly, at a rate of 22% over the past five years. So there may be other aspects that positively affect the company’s profit growth. Such as – high profit retention or effective on-site management.

When we compared to the industry’s net income growth, we found that One Media iP Group’s growth is quite high compared to the industry average growth of 15% during the same period, which is great to see.

past-earnings-growth

past-earnings-growth

Earnings growth is an important metric to consider when valuing a stock. It is important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). By doing so, they will get an idea of ​​whether the stock is heading into clear blue water or if swampy waters await. Is One Media iP Group fairly valued compared to other companies? These three metrics can help you decide.

Does One Media iP Group effectively reinvest its profits?

One Media iP Group’s three-year median dividend to shareholders is 19%, which is quite low. This means that the company keeps 81% of its profit. This suggests that management is reinvesting most of the profits to grow the business, which is evident from the growth the company has seen.

In addition, One Media iP Group is committed to continuing to share its profits with shareholders, which we infer from its long history of paying dividends for at least ten years.

Summary

Overall, it looks like One Media iP Group has some positive aspects to its business. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see significant growth in its bottom line. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. To know more about the company’s future earnings growth projections take a look at this free report on analyst forecasts for the company to learn more.

Do you have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, you can email editors (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only by using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any shares and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis driven by fundamental data. Note that our analysis may not take into account recent price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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