Where the Comment is King

THE NEWS COMMENTER

VOTE  (0)  (0)

OnTheMarket plc's (LON:OTMP) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Added 08-06-22 05:04:03am EST - “OnTheMarket's (LON:OTMP) stock is up by a considerable 19% over the past three months. Given that stock prices are...” - News.yahoo.com

CLICK TO SHARE

Posted By TheNewsCommenter: From News.yahoo.com: “OnTheMarket plc's (LON:OTMP) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?”. Below is an excerpt from the article.

OnTheMarket's (LON:OTMP) stock is up by a considerable 19% 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. In this article, we decided to focus on OnTheMarket's ROE.

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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each £1 of shareholders' capital it has, the company made £0.01 in profit.

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.

As you can see, OnTheMarket's ROE looks pretty weak. Even when compared to the industry average of 18%, the ROE figure is pretty disappointing. Despite this, surprisingly, OnTheMarket saw an exceptional 28% net income growth over the past five years. Therefore, there could be other reasons behind this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

Read more...

If you don't see any comments yet, congrats! You get first comment. Be nice and have fun.

Comment Box is loading comments...

CLICK TO SHARE

BACK TO THE HOME-PAGE