Kewal Kiran Clothing Limited's (NSE:KKCL) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Simply Wall St · 07/03 00:15

Most readers would already be aware that Kewal Kiran Clothing's (NSE:KKCL) stock increased significantly by 25% over the past month. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Kewal Kiran Clothing's ROE in this article.

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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Do You 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 Kewal Kiran Clothing is:

15% = ₹1.5b ÷ ₹9.9b (Based on the trailing twelve months to March 2025).

The 'return' is the profit over the last twelve months. That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.15 in profit.

Check out our latest analysis for Kewal Kiran Clothing

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.

Kewal Kiran Clothing's Earnings Growth And 15% ROE

To begin with, Kewal Kiran Clothing seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 7.7%. Probably as a result of this, Kewal Kiran Clothing was able to see an impressive net income growth of 30% over the last five years. We reckon that there could also be other factors at play here. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then compared Kewal Kiran Clothing's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 19% in the same 5-year period.

past-earnings-growth
NSEI:KKCL Past Earnings Growth July 3rd 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Kewal Kiran Clothing's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Kewal Kiran Clothing Making Efficient Use Of Its Profits?

Kewal Kiran Clothing's three-year median payout ratio to shareholders is 13%, which is quite low. This implies that the company is retaining 87% of its profits. So it seems like the management is reinvesting profits heavily to grow its business and this reflects in its earnings growth number.

Moreover, Kewal Kiran Clothing is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.

Conclusion

On the whole, we feel that Kewal Kiran Clothing's performance has been quite good. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. 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.