Is Axiom Properties Limited’s (ASX:AXI) Recent Stock Performance Tethered To Its Strong Fundamentals?

Axiom Properties (ASX:AXI) shares are up 29% over the past three months. Markets typically pay for a company’s long-term fundamentals, so we decided to look at a company’s key performance indicators to see if they could impact the market. . Specifically, I chose to explore Axiom Properties’ ROE for this article.

Return on equity or ROE is an important factor for shareholders to consider as it indicates how effectively capital is being reinvested. In other words, it is a rate of return that measures the rate of return on capital provided by the company’s shareholders.

See the latest analysis from Axiom Properties

How do you calculate return on equity?

of ROE formula teeth:

Return on Equity = Net Income (from Continuing Operations) ÷ Shareholders’ Equity

So, based on the above formula, the axiom property ROE is:

29% = AUD 5.5 million ÷ AUD 19 million (based on the last 12 months to June 2022).

“Revenue” is the income a business earned in the last year. This therefore means that for every A$1 invested by a shareholder, the company will generate a profit of his A$0.29.

What does ROE have to do with revenue growth?

So far, we’ve learned that ROE measures how efficiently a company generates profits. Depending on how much of these earnings a company reinvests or “retains” and how effectively it does so, a company’s potential for revenue growth can be assessed. All else being equal, companies with both high return on equity and high profit margins typically have higher growth rates compared to companies that do not have the same characteristics.

Axiom Properties revenue growth and 29% ROE

First, we recognize that Axiom Properties has a very high ROE. Second, his ROE for the company is very good, even compared to the industry average of 7.8%. This probably laid the foundation for Axiom Properties’ modest 13% net profit growth seen over the past five years.

Second, when compared to the industry’s net profit growth rate, we found Axiom Properties’ growth rate to be very high when compared to the industry average growth rate of 4.8% over the same period. This is great.

Earnings growth is a big factor in stock valuations. Investors should check whether expected revenue growth or decline is expected. This helps determine whether the stock is positioned for a bright future or a dark future. If you’re in doubt about Axiom Properties’ rating, check out this gauge of price/earnings ratio compared to the industry.

Is Axiom Properties reinvesting profits efficiently?

Conclusion

Overall, I am very happy with the performance of Axiom Properties. I especially like that the company has reinvested heavily in their business and is delivering a high rate of return. Not surprisingly, this translates into impressive profit growth. If the company continues to grow earnings as it has in the past, it could have a positive impact on the stock price given how earnings per share impacts the long-term stock price. Let’s not forget that the stock price outcome also depends on the potential risks faced by the company. As such, it is important for investors to be aware of the risks involved in doing business. To see the three risks he identified for Axiom Properties, visit our risk dashboard for free.

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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …