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Is Cheil Worldwide Inc.'s (KRX:030000) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Simply Wall St · 07/25 23:12

Cheil Worldwide's (KRX:030000) stock is up by a considerable 17% over the past three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Particularly, we will be paying attention to Cheil Worldwide's ROE today.

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?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Cheil Worldwide is:

14% = ₩193b ÷ ₩1.4t (Based on the trailing twelve months to March 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.14 in profit.

See our latest analysis for Cheil Worldwide

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

A Side By Side comparison of Cheil Worldwide's Earnings Growth And 14% ROE

To start with, Cheil Worldwide's ROE looks acceptable. Especially when compared to the industry average of 5.5% the company's ROE looks pretty impressive. This certainly adds some context to Cheil Worldwide's decent 6.2% net income growth seen over the past five years.

Next, on comparing with the industry net income growth, we found that Cheil Worldwide's growth is quite high when compared to the industry average growth of 5.1% in the same period, which is great to see.

past-earnings-growth
KOSE:A030000 Past Earnings Growth July 25th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Cheil Worldwide fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Cheil Worldwide Efficiently Re-investing Its Profits?

Cheil Worldwide has a significant three-year median payout ratio of 60%, meaning that it is left with only 40% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.

Besides, Cheil Worldwide has been paying dividends over a period of six years. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 61%. As a result, Cheil Worldwide's ROE is not expected to change by much either, which we inferred from the analyst estimate of 16% for future ROE.

Conclusion

In total, we are pretty happy with Cheil Worldwide's performance. In particular, its high ROE is quite noteworthy and also the probable explanation behind its considerable earnings growth. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.