Investment AB Latour (publ) (STO: LATO B) Equities on an uptrend: Is strong financial data driving the market?

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Most readers already know that the stock of Investment AB Latour (STO: LATO B) has risen significantly by 38% in the last three months. Since the market typically pays for a company’s long-term fundamentals, we decided to study the company’s KPIs to see if they could influence the market. In particular, we will pay particular attention to the ROE of Investment AB Latour today.

Return on equity or ROE is a test of how effectively a company increases its value and manages investor money. In simpler terms, it measures a company’s profitability relative to equity.

Check out our latest review for Investment AB Latour

How do you calculate return on equity?

ROE can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

Thus, based on the above formula, the ROE for Investment AB Latour is:

16% = kr4.7b kr31b (based on the last twelve months up to September 2021).

The “return” is the amount earned after tax over the past twelve months. One way to conceptualize this is that for every SEK1 of share capital it has, the company has made a profit of SEK0.16.

What does ROE have to do with profit growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. Based on how much of those profits the company reinvests or “withholds” and its efficiency, we are then able to assess a company’s profit growth potential. Generally speaking, all other things being equal, companies with high return on equity and high profit retention have a higher growth rate than companies that do not share these attributes.

Growth of Investissement AB Latour’s profits and 16% of ROE

At first glance, Investment AB Latour appears to have a decent ROE. Especially compared to the industry average of 12%, the company’s ROE looks pretty impressive. This likely laid the foundation for Investment AB Latour’s moderate 14% net profit growth over the past five years.

Then, comparing with the growth in net income of the industry, we found that the growth reported by Investment AB Latour was lower than the industry growth of 18% during the same period, which is not something we like to see.

OM: LATO B Growth in past profits as of December 31, 2021

The basis for attaching value to a business is, to a large extent, related to the growth of its profits. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. This then helps him determine whether the stock is set for a bright or dark future. Investment AB Latour is it fair valued compared to other companies? These 3 evaluation measures could help you decide.

Does Investment AB Latour Use Profits Efficiently?

With a three-year median payout ratio of 34% (implying that the company keeps 66% of its profits), it looks like Investment AB Latour is reinvesting effectively so that it sees respectable profit growth and payout. a dividend that is well hedged.

In addition, Investment AB Latour has paid dividends over a period of at least ten years, which means the company is very serious about sharing its profits with its shareholders.

Summary

Overall, we are quite satisfied with the performance of Investment AB Latour. In particular, we like the fact that the company is reinvesting heavily in its business, and at a high rate of return. As a result, its decent profit growth is not surprising. If the company continues to grow earnings like it has, it could have a positive impact on its stock price given the influence of earnings per share on long-term stock prices. Remember that the price of a stock also depends on the perceived risk. Therefore, investors should keep themselves informed of the risks involved before investing in a business. You can see the 1 risk that we have identified for Investment AB Latour by visiting our risk dashboard for free on our platform here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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