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Could The Market Be Wrong About Kusurinomadoguchi, Inc. (TSE:5592) Given Its Attractive Financial Prospects?

Simply Wall St · 1d ago

Kusurinomadoguchi (TSE:5592) has had a rough three months with its share price down 32%. However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. In this article, we decided to focus on Kusurinomadoguchi's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How Is ROE Calculated?

The formula for ROE is:

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

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

34% = JP¥3.2b ÷ JP¥9.4b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. That means that for every ¥1 worth of shareholders' equity, the company generated ¥0.34 in profit.

See our latest analysis for Kusurinomadoguchi

What Has ROE Got To Do With 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. 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 Kusurinomadoguchi's Earnings Growth And 34% ROE

Firstly, we acknowledge that Kusurinomadoguchi has a significantly high ROE. Second, a comparison with the average ROE reported by the industry of 16% also doesn't go unnoticed by us. As a result, Kusurinomadoguchi's exceptional 48% net income growth seen over the past five years, doesn't come as a surprise.

We then compared Kusurinomadoguchi'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 16% in the same 5-year period.

past-earnings-growth
TSE:5592 Past Earnings Growth December 4th 2025

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Kusurinomadoguchi is trading on a high P/E or a low P/E, relative to its industry.

Is Kusurinomadoguchi Using Its Retained Earnings Effectively?

Kusurinomadoguchi's ' three-year median payout ratio is on the lower side at 14% implying that it is retaining a higher percentage (86%) of its profits. So it looks like Kusurinomadoguchi is reinvesting profits heavily to grow its business, which shows in its earnings growth.

While Kusurinomadoguchi has been growing its earnings, it only recently started to pay dividends which likely means that the company decided to impress new and existing shareholders with a dividend.

Summary

Overall, we are quite pleased with Kusurinomadoguchi's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. To know the 1 risk we have identified for Kusurinomadoguchi visit our risks dashboard for free.