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Will Weakness in CIE Automotive, S.A.'s (BME:CIE) Stock Prove Temporary Given Strong Fundamentals?

Simply Wall St · 2d ago

It is hard to get excited after looking at CIE Automotive's (BME:CIE) recent performance, when its stock has declined 4.6% over the past week. 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. Particularly, we will be paying attention to CIE Automotive'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. 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 CIE Automotive is:

20% = €369m ÷ €1.9b (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. So, this means that for every €1 of its shareholder's investments, the company generates a profit of €0.20.

Check out our latest analysis for CIE Automotive

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. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.

CIE Automotive's Earnings Growth And 20% ROE

To begin with, CIE Automotive seems to have a respectable ROE. Especially when compared to the industry average of 8.5% the company's ROE looks pretty impressive. This certainly adds some context to CIE Automotive's exceptional 20% net income growth seen over the past five years. However, there could also be other causes behind this growth. For instance, the company has a low payout ratio or is being managed efficiently.

We then performed a comparison between CIE Automotive's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 19% in the same 5-year period.

past-earnings-growth
BME:CIE Past Earnings Growth December 7th 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. Is CIE fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is CIE Automotive Using Its Retained Earnings Effectively?

CIE Automotive's three-year median payout ratio is a pretty moderate 34%, meaning the company retains 66% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like CIE Automotive is reinvesting its earnings efficiently.

Besides, CIE Automotive has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 35% of its profits over the next three years. As a result, CIE Automotive's ROE is not expected to change by much either, which we inferred from the analyst estimate of 18% for future ROE.

Summary

In total, we are pretty happy with CIE Automotive's performance. 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. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.