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Press Metal Aluminium Holdings Berhad's (KLSE:PMETAL) Stock Is Going Strong: Is the Market Following Fundamentals?

Simply Wall St · 1d ago

Most readers would already be aware that Press Metal Aluminium Holdings Berhad's (KLSE:PMETAL) stock increased significantly by 22% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. In this article, we decided to focus on Press Metal Aluminium Holdings Berhad's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Do You Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for Press Metal Aluminium Holdings Berhad is:

20% = RM2.3b ÷ RM12b (Based on the trailing twelve months to September 2025).

The 'return' is the profit over the last twelve months. That means that for every MYR1 worth of shareholders' equity, the company generated MYR0.20 in profit.

View our latest analysis for Press Metal Aluminium Holdings Berhad

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

Press Metal Aluminium Holdings Berhad's Earnings Growth And 20% ROE

To start with, Press Metal Aluminium Holdings Berhad's ROE looks acceptable. On comparing with the average industry ROE of 6.8% the company's ROE looks pretty remarkable. Probably as a result of this, Press Metal Aluminium Holdings Berhad was able to see an impressive net income growth of 21% over the last five years. However, there could also be other causes behind this growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that Press Metal Aluminium Holdings Berhad's growth is quite high when compared to the industry average growth of 3.1% in the same period, which is great to see.

past-earnings-growth
KLSE:PMETAL Past Earnings Growth December 12th 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. This then helps them determine if the stock is placed for a bright or bleak future. Is Press Metal Aluminium Holdings Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Press Metal Aluminium Holdings Berhad Efficiently Re-investing Its Profits?

Press Metal Aluminium Holdings Berhad's three-year median payout ratio is a pretty moderate 38%, meaning the company retains 62% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Press Metal Aluminium Holdings Berhad is reinvesting its earnings efficiently.

Moreover, Press Metal Aluminium Holdings Berhad 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. 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. Accordingly, forecasts suggest that Press Metal Aluminium Holdings Berhad's future ROE will be 20% which is again, similar to the current ROE.

Conclusion

Overall, we are quite pleased with Press Metal Aluminium Holdings Berhad'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. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. 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.