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Weak Financial Prospects Seem To Be Dragging Down United Super Markets Holdings Inc. (TSE:3222) Stock

Simply Wall St · 1d ago

United Super Markets Holdings (TSE:3222) has had a rough three months with its share price down 9.3%. Given that stock prices are usually driven by a company’s fundamentals over the long term, which in this case look pretty weak, we decided to study the company's key financial indicators. Specifically, we decided to study United Super Markets Holdings' ROE in this article.

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 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 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 United Super Markets Holdings is:

0.9% = JP¥1.7b ÷ JP¥200b (Based on the trailing twelve months to August 2025).

The 'return' is the yearly profit. That means that for every ¥1 worth of shareholders' equity, the company generated ¥0.01 in profit.

See our latest analysis for United Super Markets Holdings

Why Is ROE Important For Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

United Super Markets Holdings' Earnings Growth And 0.9% ROE

It is hard to argue that United Super Markets Holdings' ROE is much good in and of itself. Not just that, even compared to the industry average of 8.5%, the company's ROE is entirely unremarkable. Therefore, it might not be wrong to say that the five year net income decline of 53% seen by United Super Markets Holdings was possibly a result of it having a lower ROE. However, there could also be other factors causing the earnings to decline. For instance, the company has a very high payout ratio, or is faced with competitive pressures.

So, as a next step, we compared United Super Markets Holdings' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 9.9% over the last few years.

past-earnings-growth
TSE:3222 Past Earnings Growth December 16th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about United Super Markets Holdings''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is United Super Markets Holdings Using Its Retained Earnings Effectively?

United Super Markets Holdings' very high three-year median payout ratio of 137% over the last three years suggests that the company is paying its shareholders more than what it is earning and this explains the company's shrinking earnings. Paying a dividend beyond their means is usually not viable over the long term.

Moreover, United Super Markets Holdings 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.

Summary

Overall, we would be extremely cautious before making any decision on United Super Markets Holdings. Particularly, its ROE is a huge disappointment, not to mention its lack of proper reinvestment into the business. As a result its earnings growth has also been quite disappointing. 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 latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.