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Will Weakness in Waaree Energies Limited's (NSE:WAAREEENER) Stock Prove Temporary Given Strong Fundamentals?

Simply Wall St · 1d ago

Waaree Energies (NSE:WAAREEENER) has had a rough three months with its share price down 17%. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Particularly, we will be paying attention to Waaree Energies' ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How Do You 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 Waaree Energies is:

24% = ₹28b ÷ ₹117b (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.24 in profit.

Check out our latest analysis for Waaree Energies

Why Is ROE Important For 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. 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.

Waaree Energies' Earnings Growth And 24% ROE

At first glance, Waaree Energies seems to have a decent ROE. Even when compared to the industry average of 28% the company's ROE looks quite decent. This probably goes some way in explaining Waaree Energies' significant 44% net income growth over the past five years amongst other factors. We believe that there might also be other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

We then performed a comparison between Waaree Energies' net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 52% in the same 5-year period.

past-earnings-growth
NSEI:WAAREEENER Past Earnings Growth December 16th 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). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. 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 Waaree Energies is trading on a high P/E or a low P/E, relative to its industry.

Is Waaree Energies Efficiently Re-investing Its Profits?

Summary

Overall, we are quite pleased with Waaree Energies' 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. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. 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.