The basis for attaching value to a company is, to a great extent, tied to its earnings growth. Under the circumstances, Co-Diagnostics' considerable five year net income growth of 68% was to be expected. Secondly, even when compared to the industry average of 11% the company's ROE is quite impressive. To begin with, Co-Diagnostics has a pretty high ROE which is interesting. A Side By Side comparison of Co-Diagnostics' Earnings Growth And 27% ROE 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. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Why Is ROE Important For Earnings Growth? Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.27 in profit. The 'return' is the profit over the last twelve months. So, based on the above formula, the ROE for Co-Diagnostics is:Ģ7% = US$40m ÷ US$148m (Based on the trailing twelve months to March 2022).
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity Return on equity can be calculated by using the formula: See our latest analysis for Co-Diagnostics How Do You Calculate Return On Equity? Put another way, it reveals the company's success at turning shareholder investments into profits. Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money.
Particularly, we will be paying attention to Co-Diagnostics' ROE today. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Co-Diagnostics (NASDAQ:CODX) has had a great run on the share market with its stock up by a significant 59% over the last three months.
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