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FoundPac Group Berhad's (KLSE:FPGROUP) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Simply Wall St · 1d ago

FoundPac Group Berhad's (KLSE:FPGROUP) stock is up by a considerable 24% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to FoundPac Group Berhad'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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

ROE 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 FoundPac Group Berhad is:

14% = RM14m ÷ RM103m (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. That means that for every MYR1 worth of shareholders' equity, the company generated MYR0.14 in profit.

See our latest analysis for FoundPac Group Berhad

What Has ROE Got To Do With 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. 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.

FoundPac Group Berhad's Earnings Growth And 14% ROE

To start with, FoundPac Group Berhad's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 8.3%. As you might expect, the 2.1% net income decline reported by FoundPac Group Berhad is a bit of a surprise. Based on this, we feel that there might be other reasons which haven't been discussed so far in this article that could be hampering the company's growth. For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance.

We then compared FoundPac Group Berhad's performance with the industry and found that the company has shrunk its earnings at a slower rate than the industry earnings which has seen its earnings shrink by 6.5% in the same 5-year period. While this is not particularly good, its not particularly bad either.

past-earnings-growth
KLSE:FPGROUP Past Earnings Growth December 8th 2025

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. 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 FoundPac Group Berhad is trading on a high P/E or a low P/E, relative to its industry.

Is FoundPac Group Berhad Using Its Retained Earnings Effectively?

FoundPac Group Berhad's declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 71% (or a retention ratio of 29%). With only very little left to reinvest into the business, growth in earnings is far from likely. You can see the 3 risks we have identified for FoundPac Group Berhad by visiting our risks dashboard for free on our platform here.

Moreover, FoundPac Group Berhad has been paying dividends for nine years, which is a considerable amount of time, suggesting that management must have perceived that the shareholders prefer consistent dividends even though earnings have been shrinking.

Summary

Overall, we feel that FoundPac Group Berhad certainly does have some positive factors to consider. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return. Investors could have benefitted from the high ROE, had the company been reinvesting more of its earnings. As discussed earlier, the company is retaining a small portion of its profits. So far, we've only made a quick discussion around the company's earnings growth. So it may be worth checking this free detailed graph of FoundPac Group Berhad's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.