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EMS-CHEMIE HOLDING AG (VTX:EMSN) Stock's Been Sliding But Fundamentals Look Decent: Will The Market Correct The Share Price In The Future?

Simply Wall St · 2d ago

With its stock down 10% over the past three months, it is easy to disregard EMS-CHEMIE HOLDING (VTX:EMSN). But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. Specifically, we decided to study EMS-CHEMIE HOLDING's ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

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 EMS-CHEMIE HOLDING is:

22% = CHF467m ÷ CHF2.1b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. Another way to think of that is that for every CHF1 worth of equity, the company was able to earn CHF0.22 in profit.

See our latest analysis for EMS-CHEMIE HOLDING

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.

EMS-CHEMIE HOLDING's Earnings Growth And 22% ROE

Firstly, we acknowledge that EMS-CHEMIE HOLDING has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 9.0% which is quite remarkable. However, we are curious as to how the high returns still resulted in a flat growth for EMS-CHEMIE HOLDING in the past five years. So, there could be some other aspects that could potentially be preventing the company from growing. Such as, the company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.

As a next step, we compared EMS-CHEMIE HOLDING's performance with the industry and found thatEMS-CHEMIE HOLDING's performance is depressing even when compared with the industry, which has shrunk its earnings at a rate of 0.8% in the same period, which is a slower than the company.

past-earnings-growth
SWX:EMSN Past Earnings Growth December 12th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Is EMSN fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is EMS-CHEMIE HOLDING Making Efficient Use Of Its Profits?

With a high three-year median payout ratio of 71% (implying that the company keeps only 29% of its income) of its business to reinvest into its business), most of EMS-CHEMIE HOLDING's profits are being paid to shareholders, which explains the absence of growth in earnings.

Moreover, EMS-CHEMIE HOLDING has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Looking at the current analyst consensus data, we can see that the company's future payout ratio is expected to rise to 93% over the next three years. However, the company's ROE is not expected to change by much despite the higher expected payout ratio.

Conclusion

In total, it does look like EMS-CHEMIE HOLDING has some positive aspects to its business. 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. With that said, we studied the latest analyst forecasts and found that while the company has shrunk its earnings in the past, analysts expect its earnings to grow in the future. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.