Mueller Water Products' (NYSE:MWA) stock up by 9.2% over the past three months. Since the market usually pay for a company's long-term financial health, we decided to study the company's fundamentals to see if they could be influencing the market. In this article, we decided to focus on Mueller Water Products' ROE.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
How Is ROE Calculated?
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 Mueller Water Products is:
13% = US$100m ÷ US$755m (Based on the trailing twelve months to March 2024).
The 'return' is the income the business earned over the last year. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.13 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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company's earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.
A Side By Side comparison of Mueller Water Products' Earnings Growth And 13% ROE
To begin with, Mueller Water Products seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 14%. This probably goes some way in explaining Mueller Water Products' moderate 5.6% growth over the past five years amongst other factors.
Next, on comparing with the industry net income growth, we found that Mueller Water Products' reported growth was lower than the industry growth of 8.9% over the last few years, which is not something we like to see.
Earnings growth is an important metric to consider when valuing a stock. 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. If you're wondering about Mueller Water Products''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Is Mueller Water Products Using Its Retained Earnings Effectively?
With a three-year median payout ratio of 47% (implying that the company retains 53% of its profits), it seems that Mueller Water Products is reinvesting efficiently in a way that it sees respectable amount growth in its earnings and pays a dividend that's well covered.
Moreover, Mueller Water Products is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. Our latest analyst data shows that the future payout ratio of the company is expected to drop to 27% over the next three years.
Conclusion
On the whole, we feel that Mueller Water Products' performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see a good amount of growth in its earnings. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Mueller Water Products(NYSE:MWA)の株価は過去3か月間に9.2%上昇しました。市場は通常、企業の長期的な財務健全性に報酬を支払うため、その基本に目を向けることにしました。この記事では、当社はMueller Water ProductsのROEに焦点を当てました。
まず、Mueller Water Productsは尊敬されるROEを持っているようです。さらに、同社のROEは、業界平均の14%と似ています。これは、その他の要因も含め、過去5年間のMueller Water Productsの穏やかな5.6%の成長の説明になるでしょう。
次に、業界の当期純利益成長と比較すると、過去数年間のMueller Water Productsの報告された成長は、8.9%の業界成長よりも低かったことがわかります。これは望ましいことではありません。
収益成長は、株式評価を考慮する際に重要な指標です。投資家が知ることが重要なのは、市場が企業の予想される収益成長(または減少)を価格設定しているかどうかです。そうすることで、彼らは株式が明るい将来に向けて配置されたか、暗い将来に向けて配置されたかを判断することができます。Mueller Water Productsの評価に関心がある場合は、業界に比較して価格収益率のゲージを確認することが重要です。
Mueller Water Productsは保有された利益を効果的に使用していますか?
3年間の中央値の配当比率が47%である(同社が利益の53%を保有して再投資しており、その利益には十分にカバーされた配当を支払っています)。そのため、Mueller Water Productsは、その利益を良好な成長に見合った高い利回りで再投資しており、配当金を支払っています。
さらに、Mueller Water Productsは、株主と利益を共有し続けることに決意しており、少なくとも10年間配当金を支払っていると推測されます。当社の最新のアナリストデータによると、同社の将来の配当比率は、次の3年間で27%に低下することが予想されています。
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全体として、Mueller Water Productsのパフォーマンスは非常に良いと考えています。特に、同社がその利益の多くを高い利回りで再投資していることが好ましいです。これが当然同社の利益に成長をもたらしました。ただし、現在のアナリストの予測を見ると、同社の収益が勢いを増すことが予想されています。これらのアナリストの予測は、業界全体の予想に基づくものなのか、企業の基本に基づくものなのかを確認するには、当社のアナリスト予測ページに移動してください。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。