Grupa HRC Spolka Akcyjna's (WSE:HRC) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

Simply Wall St · 07/04 06:42

It is hard to get excited after looking at Grupa HRC Spolka Akcyjna's (WSE:HRC) recent performance, when its stock has declined 11% over the past week. However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. In this article, we decided to focus on Grupa HRC Spolka Akcyjna's ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How To 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 Grupa HRC Spolka Akcyjna is:

7.3% = zł91k ÷ zł1.2m (Based on the trailing twelve months to March 2025).

The 'return' is the amount earned after tax over the last twelve months. That means that for every PLN1 worth of shareholders' equity, the company generated PLN0.07 in profit.

See our latest analysis for Grupa HRC Spolka Akcyjna

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.

Grupa HRC Spolka Akcyjna's Earnings Growth And 7.3% ROE

On the face of it, Grupa HRC Spolka Akcyjna's ROE is not much to talk about. Next, when compared to the average industry ROE of 20%, the company's ROE leaves us feeling even less enthusiastic. In spite of this, Grupa HRC Spolka Akcyjna was able to grow its net income considerably, at a rate of 48% in the last five years. We reckon that there could be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Grupa HRC Spolka Akcyjna'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 32% in the same 5-year period.

past-earnings-growth
WSE:HRC Past Earnings Growth July 4th 2025

Earnings growth is a huge factor in stock valuation. 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 Grupa HRC Spolka Akcyjna fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Grupa HRC Spolka Akcyjna Efficiently Re-investing Its Profits?

Given that Grupa HRC Spolka Akcyjna doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Summary

In total, it does look like Grupa HRC Spolka Akcyjna has some positive aspects to its business. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. Our risks dashboard would have the 4 risks we have identified for Grupa HRC Spolka Akcyjna.