Wayside Technology Group (NASDAQ:WSTG) has had a rough three months with its stock down 25%. However, a closer look at its sound financials may make you think again. The company is noteworthy given that fundamentals usually drive long-term market outcomes. In this article, I chose to focus on his ROE for Wayside Technology Group.
Return on equity or ROE is an important metric used to assess how efficiently a company’s management is using the company’s capital. In other words, ROE shows the return each dollar makes on a shareholder’s investment.
See the latest analysis from Wayside Technology Group
ROE calculation method
of Formula for Return on Equity teeth:
Return on Equity = Net Income (from Continuing Operations) ÷ Shareholders’ Equity
Therefore, based on the above formula, Wayside Technology Group’s ROE would be:
21% = US$11 million ÷ US$54 million (based on the last 12 months to June 2022).
“Yield” is the annual profit. So, this means that for every $1 a shareholder invests, the company generates his $0.21 profit.
Why ROE Is Important to Profit Growth
It has already been established that ROE serves as an efficient profit-making metric to gauge a company’s future earnings. Depending on how much of these earnings a company reinvests or “holds” and how effective it is, a company’s potential for revenue growth can be assessed. Generally speaking, other things being equal, companies with high return on equity and earnings retention will have higher growth rates than companies that do not share these attributes.
Wayside Technology Group revenue growth and 21% ROE
At first glance, Wayside Technology Group appears to have a sizeable ROE. His ROE for the company is quite impressive, especially when compared to the industry average of 14%. This probably set the stage for Wayside Technology Group’s modest 16% net profit growth seen over the past five years.
Next, when we compared Wayside Technology Group’s net profit growth with the industry, we found that the company’s growth matched the industry’s average growth rate of 17% over the same period.
Earnings growth is a big factor in stock valuations. The next thing investors need to determine is whether expected earnings growth, or lack thereof, is already baked into the stock price. That way, you’ll know if your stock is headed for clear blue waters, or if wet waters await. If you’re in doubt about Wayside Technology Group’s valuation, check out this gauge of its price/earnings ratio relative to the industry.
Is Wayside Technology Group making good use of retained earnings?
With a three-year median payout ratio of 47% (meaning the company retains 53% of its profits), Wayside Technology Group confirms a sizeable amount of revenue growth and pays dividends It seems that you are effectively reinvesting in a way. well covered.
Furthermore, Wayside Technology Group is determined to continue sharing profits with its shareholders, as can be inferred from its long history of paying dividends for at least ten years.
Overall, I am very pleased with the performance of Wayside Technology Group. In particular, it is great to see that the company has invested heavily in its business, has a high rate of return, and has seen a significant increase in revenue.
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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 methodologies and our articles are not intended as 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 …
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