U.S. markets closed
  • S&P Futures

    4,066.50
    -15.25 (-0.37%)
     
  • Dow Futures

    34,328.00
    -101.00 (-0.29%)
     
  • Nasdaq Futures

    12,000.75
    -62.00 (-0.51%)
     
  • Russell 2000 Futures

    1,875.60
    -8.10 (-0.43%)
     
  • Crude Oil

    81.22
    0.00 (0.00%)
     
  • Gold

    1,811.60
    -3.60 (-0.20%)
     
  • Silver

    22.81
    -0.03 (-0.14%)
     
  • EUR/USD

    1.0517
    -0.0011 (-0.11%)
     
  • 10-Yr Bond

    3.5290
    -0.1740 (-4.70%)
     
  • Vix

    19.84
    -0.74 (-3.60%)
     
  • GBP/USD

    1.2243
    -0.0014 (-0.11%)
     
  • USD/JPY

    135.1380
    -0.1680 (-0.12%)
     
  • BTC-USD

    16,934.17
    -191.90 (-1.12%)
     
  • CMC Crypto 200

    401.42
    -4.73 (-1.16%)
     
  • FTSE 100

    7,558.49
    -14.56 (-0.19%)
     
  • Nikkei 225

    27,702.90
    -523.18 (-1.85%)
     

IBEX Limited's (NASDAQ:IBEX) Recent Stock Performance Looks Decent- Can Strong Fundamentals Be the Reason?

IBEX's (NASDAQ:IBEX) stock is up by 7.0% 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. Particularly, we will be paying attention to IBEX'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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

Check out our latest analysis for IBEX

How Is ROE Calculated?

The formula for ROE is:

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

So, based on the above formula, the ROE for IBEX is:

23% = US$22m ÷ US$97m (Based on the trailing twelve months to March 2022).

The 'return' is the amount earned after tax over the last twelve months. That means that for every $1 worth of shareholders' equity, the company generated $0.23 in profit.

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. 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.

IBEX's Earnings Growth And 23% ROE

To begin with, IBEX has a pretty high ROE which is interesting. Additionally, the company's ROE is higher compared to the industry average of 17% which is quite remarkable. Under the circumstances, IBEX's considerable five year net income growth of 65% was to be expected.

As a next step, we compared IBEX's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 15%.

past-earnings-growth
past-earnings-growth

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. Is IBEX fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is IBEX Making Efficient Use Of Its Profits?

IBEX doesn't pay any dividend to its shareholders, meaning that the company has been reinvesting all of its profits into the business. This is likely what's driving the high earnings growth number discussed above.

Summary

In total, we are pretty happy with IBEX's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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.