BLS International Services Limited's (NSE:BLS) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Simply Wall St · 06/10 00:44

Most readers would already be aware that BLS International Services' (NSE:BLS) stock increased significantly by 18% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. In this article, we decided to focus on BLS International Services' 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 simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Do You Calculate Return On Equity?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for BLS International Services is:

27% = ₹5.4b ÷ ₹20b (Based on the trailing twelve months to March 2025).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.27 in profit.

Check out our latest analysis for BLS International Services

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

BLS International Services' Earnings Growth And 27% ROE

To begin with, BLS International Services seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 9.8%. This probably laid the ground for BLS International Services' significant 48% net income growth seen over the past five years. However, there could also be other causes behind this growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared BLS International Services' net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 27%.

past-earnings-growth
NSEI:BLS Past Earnings Growth June 10th 2025

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about BLS International Services''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is BLS International Services Making Efficient Use Of Its Profits?

BLS International Services' ' three-year median payout ratio is on the lower side at 13% implying that it is retaining a higher percentage (87%) of its profits. So it looks like BLS International Services is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Moreover, BLS International Services is determined to keep sharing its profits with shareholders which we infer from its long history of nine years of paying a dividend.

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Conclusion

In total, we are pretty happy with BLS International Services' performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings.