Is Deleum Berhad's (KLSE:DELEUM) Recent Stock Performance Tethered To Its Strong Fundamentals?
editorial-team@simplywallst.com (Simply Wall St)
4 min read
Most readers would already be aware that Deleum Berhad's (KLSE:DELEUM) stock increased significantly by 5.1% over the past month. 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. Particularly, we will be paying attention to Deleum Berhad's ROE today.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.
Return on equity 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 Deleum Berhad is:
20% = RM101m ÷ RM498m (Based on the trailing twelve months to December 2024).
The 'return' is the yearly profit. One way to conceptualize this is that for each MYR1 of shareholders' capital it has, the company made MYR0.20 in profit.
What Is The Relationship Between ROE And Earnings Growth?
We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.
Deleum Berhad's Earnings Growth And 20% ROE
At first glance, Deleum Berhad seems to have a decent ROE. Especially when compared to the industry average of 16% the company's ROE looks pretty impressive. Probably as a result of this, Deleum Berhad was able to see an impressive net income growth of 29% over the last five years. We believe that there might also 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.
As a next step, we compared Deleum Berhad's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 28% in the same period.
KLSE:DELEUM Past Earnings Growth April 11th 2025
Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Deleum Berhad is trading on a high P/E or a low P/E , relative to its industry.
Is Deleum Berhad Making Efficient Use Of Its Profits?
Deleum Berhad's three-year median payout ratio is a pretty moderate 48%, meaning the company retains 52% of its income. By the looks of it, the dividend is well covered and Deleum Berhad is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.
Besides, Deleum Berhad has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 45%. However, Deleum Berhad's future ROE is expected to decline to 15% despite there being not much change anticipated in the company's payout ratio.
Conclusion
On the whole, we feel that Deleum Berhad'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 company's future earnings growth forecasts take a look at this freereport on analyst forecasts for the company to find out more.
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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.
