Can The Market Catch Up?

Looking at IHH Healthcare Berhad’s (KLSE:IHH) mostly flat share price movement over the past three months, it is easy to think that there’s nothing interesting about the stock. However, its worth giving the company a closer given that its key financial performance indicators aren’t particularly bad and long-term financial health is usually what drive market prices. Particularly, we will be paying attention to IHH Healthcare Berhad’s ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

See our latest analysis for IHH Healthcare Berhad

How To Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for IHH Healthcare Berhad is:

7.3% = RM2.2b ÷ RM29b (Based on the trailing twelve months to September 2022).

The ‘return’ is the profit over the last twelve months. That means that for every MYR1 worth of shareholders’ equity, the company generated MYR0.07 in profit.

What Has ROE Got To Do With Earnings Growth?

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….