Is AlzChem Group AG's (ETR:ACT) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

editorial-team@simplywallst.com (Simply Wall St)

Sat, Apr 12, 2025, 1:16 AM 3 min read

AlzChem Group (ETR:ACT) has had a great run on the share market with its stock up by a significant 61% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on AlzChem Group's ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

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 AlzChem Group is:

26% = €54m ÷ €207m (Based on the trailing twelve months to December 2024).

The 'return' is the yearly profit. So, this means that for every €1 of its shareholder's investments, the company generates a profit of €0.26.

View our latest analysis for AlzChem Group

What Has ROE Got To Do With 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. 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 AlzChem Group's Earnings Growth And 26% ROE

First thing first, we like that AlzChem Group has an impressive ROE. Secondly, even when compared to the industry average of 9.0% the company's ROE is quite impressive. Under the circumstances, AlzChem Group's considerable five year net income growth of 21% was to be expected.

As a next step, we compared AlzChem Group'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 8.3%.

past-earnings-growth — XTRA:ACT Past Earnings Growth April 12th 2025

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is AlzChem Group fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is AlzChem Group Efficiently Re-investing Its Profits?

AlzChem Group's three-year median payout ratio is a pretty moderate 35%, meaning the company retains 65% of its income. By the looks of it, the dividend is well covered and AlzChem Group is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.

Besides, AlzChem Group has been paying dividends over a period of seven years. This shows that the company is committed to sharing profits with its shareholders. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 33% of its profits over the next three years. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 26%.

Conclusion

On the whole, we feel that AlzChem Group's 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 substantial growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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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.