Yahoo Finance Bijou Brigitte modische Accessoires Aktiengesellschaft's (ETR:BIJ) Stock Has Fared Decently: Is the Market Following Strong Financials?
Bijou Brigitte modische Accessoires' (ETR:BIJ) stock up by 1.7% over the past week. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Bijou Brigitte modische Accessoires' ROE.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
See our latest analysis for Bijou Brigitte modische Accessoires
How To Calculate Return On Equity?
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 Bijou Brigitte modische Accessoires is:
10% = €24m ÷ €240m (Based on the trailing twelve months to December 2023).
The 'return' is the yearly profit. So, this means that for every €1 of its shareholder's investments, the company generates a profit of €0.10.
What Is The Relationship Between ROE And Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.
Bijou Brigitte modische Accessoires' Earnings Growth And 10% ROE
To start with, Bijou Brigitte modische Accessoires' ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 4.9%. This probably laid the ground for Bijou Brigitte modische Accessoires' moderate 19% net income growth seen over the past five years.
We then compared Bijou Brigitte modische Accessoires' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 11% in the same 5-year period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. 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 Bijou Brigitte modische Accessoires is trading on a high P/E or a low P/E, relative to its industry.
Is Bijou Brigitte modische Accessoires Using Its Retained Earnings Effectively?
The high three-year median payout ratio of 68% (or a retention ratio of 32%) for Bijou Brigitte modische Accessoires suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.
Additionally, Bijou Brigitte modische Accessoires has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders.
Conclusion
Overall, we are quite pleased with Bijou Brigitte modische Accessoires' performance. In particular, its high ROE is quite noteworthy and also the probable explanation behind its considerable earnings growth. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. So far, we've only made a quick discussion around the company's earnings growth. To gain further insights into Bijou Brigitte modische Accessoires' past profit growth, check out this visualization of past earnings, revenue and cash flows.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only 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 stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
