Bürgerliches Brauhaus Ravensburg - Lindau Aktiengesellschaft's (BST:BBR) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

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

Wed, May 14, 2025, 10:48 PM 3 min read

Bürgerliches Brauhaus Ravensburg - Lindau (BST:BBR) has had a rough week with its share price down 10.0%. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Specifically, we decided to study Bürgerliches Brauhaus Ravensburg - Lindau's ROE in this article.

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. Put another way, it reveals the company's success at turning shareholder investments into profits.

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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 Bürgerliches Brauhaus Ravensburg - Lindau is:

5.1% = €490k ÷ €9.6m (Based on the trailing twelve months to June 2024).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every €1 worth of equity, the company was able to earn €0.05 in profit.

Check out our latest analysis for Bürgerliches Brauhaus Ravensburg - Lindau

Why Is ROE Important For 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.

Bürgerliches Brauhaus Ravensburg - Lindau's Earnings Growth And 5.1% ROE

When you first look at it, Bürgerliches Brauhaus Ravensburg - Lindau's ROE doesn't look that attractive. However, its ROE is similar to the industry average of 4.6%, so we won't completely dismiss the company. Moreover, we are quite pleased to see that Bürgerliches Brauhaus Ravensburg - Lindau's net income grew significantly at a rate of 34% over the last five years. Considering the moderately low ROE, it is quite possible that there might be some 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 with the industry net income growth, we found that the growth figure reported by Bürgerliches Brauhaus Ravensburg - Lindau compares quite favourably to the industry average, which shows a decline of 11% over the last few years.

past-earnings-growth — BST:BBR Past Earnings Growth May 15th 2025

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is Bürgerliches Brauhaus Ravensburg - Lindau fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Bürgerliches Brauhaus Ravensburg - Lindau Using Its Retained Earnings Effectively?

Conclusion

Overall, we feel that Bürgerliches Brauhaus Ravensburg - Lindau certainly does have some positive factors to consider. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. You can see the 2 risks we have identified for Bürgerliches Brauhaus Ravensburg - Lindau by visiting our risks dashboard for free on our platform here.

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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.