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Are Robust Financials Driving The Recent Rally In Goodwin PLC's (LON:GDWN) Stock?

Simply Wall St · 11/18/2025 05:10

Goodwin (LON:GDWN) has had a great run on the share market with its stock up by a significant 111% over the last 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. In this article, we decided to focus on Goodwin's 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. Put another way, it reveals the company's success at turning shareholder investments into profits.

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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 Goodwin is:

18% = UK£26m ÷ UK£142m (Based on the trailing twelve months to April 2025).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every £1 worth of equity, the company was able to earn £0.18 in profit.

Check out our latest analysis for Goodwin

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.

A Side By Side comparison of Goodwin's Earnings Growth And 18% ROE

To begin with, Goodwin seems to have a respectable ROE. On comparing with the average industry ROE of 12% the company's ROE looks pretty remarkable. This probably laid the ground for Goodwin's moderate 19% net income growth seen over the past five years.

As a next step, we compared Goodwin's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 7.4%.

past-earnings-growth
LSE:GDWN Past Earnings Growth November 18th 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. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Goodwin's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Goodwin Making Efficient Use Of Its Profits?

Goodwin has a significant three-year median payout ratio of 55%, meaning that it is left with only 45% 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.

Moreover, Goodwin 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.

Summary

On the whole, we feel that Goodwin's performance has been quite good. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. So far, we've only made a quick discussion around the company's earnings growth. You can do your own research on Goodwin and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.