Aris Mining Corporation's (TSE:ARIS) Stock Is Going Strong: Have Financials A Role To Play?

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

Thu, Apr 3, 2025, 12:53 PM 3 min read

Aris Mining's (TSE:ARIS) stock is up by a considerable 36% over the past three months. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. Particularly, we will be paying attention to Aris Mining'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.

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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 Aris Mining is:

2.2% = US$23m ÷ US$1.1b (Based on the trailing twelve months to December 2024).

The 'return' is the income the business earned over the last year. That means that for every CA$1 worth of shareholders' equity, the company generated CA$0.02 in profit.

Check out our latest analysis for Aris Mining

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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. 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.

Aris Mining's Earnings Growth And 2.2% ROE

It is hard to argue that Aris Mining's ROE is much good in and of itself. Even when compared to the industry average of 10.0%, the ROE figure is pretty disappointing. In spite of this, Aris Mining was able to grow its net income considerably, at a rate of 21% in the last five years. We believe that there might be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing Aris Mining's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 21% over the last few years.

past-earnings-growth — TSX:ARIS Past Earnings Growth April 3rd 2025

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Aris Mining's's valuation, check out this gauge of its price-to-earnings ratio , as compared to its industry.

Is Aris Mining Efficiently Re-investing Its Profits?

While the company did pay out a portion of its dividend in the past, it currently doesn't pay a regular dividend. This is likely what's driving the high earnings growth number discussed above.

Summary

In total, it does look like Aris Mining has some positive aspects to its business. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. 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.

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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.