Do Its Financials Have Any Role To Play In Driving Pentamaster Corporation Berhad's (KLSE:PENTA) Stock Up Recently?

Simply Wall St · 1d ago

Pentamaster Corporation Berhad (KLSE:PENTA) has had a great run on the share market with its stock up by a significant 10% over the last week. 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. Specifically, we decided to study Pentamaster Corporation Berhad's ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

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 Pentamaster Corporation Berhad is:

9.6% = RM94m ÷ RM976m (Based on the trailing twelve months to March 2025).

The 'return' is the profit over the last twelve months. So, this means that for every MYR1 of its shareholder's investments, the company generates a profit of MYR0.10.

See our latest analysis for Pentamaster Corporation Berhad

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Pentamaster Corporation Berhad's Earnings Growth And 9.6% ROE

When you first look at it, Pentamaster Corporation Berhad's ROE doesn't look that attractive. Although a closer study shows that the company's ROE is higher than the industry average of 6.0% which we definitely can't overlook. However, Pentamaster Corporation Berhad has seen a flattish net income growth over the past five years, which is not saying much. Bear in mind, the company does have a slightly low ROE. It is just that the industry ROE is lower. Hence, this goes some way in explaining the flat earnings growth.

As a next step, we compared Pentamaster Corporation Berhad's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 6.0% in the same period.

past-earnings-growth
KLSE:PENTA Past Earnings Growth June 10th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. Is Pentamaster Corporation Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Pentamaster Corporation Berhad Efficiently Re-investing Its Profits?

Pentamaster Corporation Berhad's low three-year median payout ratio of 17%, (meaning the company retains83% of profits) should mean that the company is retaining most of its earnings and consequently, should see higher growth than it has reported.

Additionally, Pentamaster Corporation Berhad has paid dividends over a period of five years, which means that the company's management is determined to pay dividends even if it means little to no earnings growth. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 15%. Accordingly, forecasts suggest that Pentamaster Corporation Berhad's future ROE will be 11% which is again, similar to the current ROE.

Summary

Overall, we feel that Pentamaster Corporation Berhad certainly does have some positive factors to consider. However, while the company does have a decent ROE and a high profit retention, its earnings growth number is quite disappointing. This suggests that there might be some external threat to the business, that's hampering growth. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.