Master-Pack Group Berhad’s (KLSE:MASTER) stock has seen a significant 10% increase over the past three months, prompting investors to take a closer look at the company’s key performance indicators. One such indicator that has caught the attention of market analysts is the Return on Equity (ROE) of Master-Pack Group Berhad.
ROE is a crucial metric that measures how effectively a company is utilizing its shareholders’ equity to generate profits. In the case of Master-Pack Group Berhad, the ROE stands at 15%, calculated as RM25m divided by RM170m based on the trailing twelve months to December 2023. This means that for every MYR1 of shareholders’ equity, the company generated MYR0.15 in profit.
The relationship between ROE and earnings growth is essential for investors to consider. Companies with a higher ROE and profit retention tend to have a higher growth rate compared to others. In the case of Master-Pack Group Berhad, its ROE of 15% is above the industry average of 7.0%, reflecting positively on the company’s 20% net income growth over the past five years.
Furthermore, Master-Pack Group Berhad’s three-year median payout ratio of 21% indicates that the company is reinvesting a significant portion (79%) of its profits back into the business for growth. This strategy, coupled with consistent dividend payments over the years, showcases the company’s commitment to maximizing shareholder value.
Overall, the market’s positive response to Master-Pack Group Berhad’s stock performance can be attributed to its strong ROE, earnings growth, and prudent reinvestment of profits. Investors are advised to consider these factors along with potential risks before making investment decisions.