MIXI, Inc.'s (TSE:2121) Financials Are Too Obscure To Link With Current Share Price Momentum: What's In Store For the Stock?

Simply Wall St · 07/01 00:40

MIXI's (TSE:2121) stock up by 6.7% over the past three months. However, the company's financials look a bit inconsistent and market outcomes are ultimately driven by long-term fundamentals, meaning that the stock could head in either direction. In this article, we decided to focus on MIXI's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for MIXI is:

9.7% = JP¥18b ÷ JP¥181b (Based on the trailing twelve months to March 2025).

The 'return' is the income the business earned over the last year. Another way to think of that is that for every ¥1 worth of equity, the company was able to earn ¥0.10 in profit.

View our latest analysis for MIXI

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. 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. 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.

MIXI's Earnings Growth And 9.7% ROE

To begin with, MIXI seems to have a respectable ROE. Further, the company's ROE is similar to the industry average of 9.7%. However, while MIXI has a pretty respectable ROE, its five year net income decline rate was 12% . We reckon that there could be some other factors at play here that are preventing the company's growth. These include low earnings retention or poor allocation of capital.

That being said, we compared MIXI's performance with the industry and were concerned when we found that while the company has shrunk its earnings, the industry has grown its earnings at a rate of 2.7% in the same 5-year period.

past-earnings-growth
TSE:2121 Past Earnings Growth July 1st 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 2121 fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is MIXI Efficiently Re-investing Its Profits?

MIXI's declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 101% (or a retention ratio of -1.0%). With only very little left to reinvest into the business, growth in earnings is far from likely.

Moreover, MIXI has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth.

Conclusion

Overall, we have mixed feelings about MIXI. Despite the high ROE, the company has a disappointing earnings growth number, due to its poor rate of reinvestment into its business. Having said that, looking at current analyst estimates, we found that the company's earnings growth rate is expected to see a huge improvement. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.