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Krishna Institute of Medical Sciences Limited's (NSE:KIMS) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Simply Wall St · 06/11 00:03

Krishna Institute of Medical Sciences (NSE:KIMS) has had a great run on the share market with its stock up by a significant 18% over the last three months. 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. In this article, we decided to focus on Krishna Institute of Medical Sciences' 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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

ROE 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 Krishna Institute of Medical Sciences is:

17% = ₹4.1b ÷ ₹24b (Based on the trailing twelve months to March 2025).

The 'return' is the income the business earned over the last year. That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.17 in profit.

See our latest analysis for Krishna Institute of Medical Sciences

What Is The Relationship Between ROE And Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. 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.

Krishna Institute of Medical Sciences' Earnings Growth And 17% ROE

To start with, Krishna Institute of Medical Sciences' ROE looks acceptable. Especially when compared to the industry average of 10% the company's ROE looks pretty impressive. This probably laid the ground for Krishna Institute of Medical Sciences' moderate 12% net income growth seen over the past five years.

We then compared Krishna Institute of Medical Sciences' net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 22% in the same 5-year period, which is a bit concerning.

past-earnings-growth
NSEI:KIMS Past Earnings Growth June 11th 2025

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Krishna Institute of Medical Sciences is trading on a high P/E or a low P/E, relative to its industry.

Is Krishna Institute of Medical Sciences Using Its Retained Earnings Effectively?

Krishna Institute of Medical Sciences doesn't pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the decent earnings growth number that we discussed above.

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Conclusion

In total, we are pretty happy with Krishna Institute of Medical Sciences' performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. As a result, the decent growth in its earnings is not surprising. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.