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G & M Holdings Limited's (HKG:6038) Stock Is Going Strong: Is the Market Following Fundamentals?

Simply Wall St · 2d ago

G & M Holdings' (HKG:6038) stock is up by a considerable 36% 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. Specifically, we decided to study G & M Holdings' 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?

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 G & M Holdings is:

16% = HK$52m ÷ HK$316m (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each HK$1 of shareholders' capital it has, the company made HK$0.16 in profit.

See our latest analysis for G & M Holdings

What Has ROE Got To Do With Earnings Growth?

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

G & M Holdings' Earnings Growth And 16% ROE

At first glance, G & M Holdings seems to have a decent ROE. On comparing with the average industry ROE of 5.9% the company's ROE looks pretty remarkable. This certainly adds some context to G & M Holdings' decent 17% net income growth seen over the past five years.

We then compared G & M Holdings' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 0.2% in the same 5-year period.

past-earnings-growth
SEHK:6038 Past Earnings Growth December 17th 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 G & M Holdings is trading on a high P/E or a low P/E, relative to its industry.

Is G & M Holdings Efficiently Re-investing Its Profits?

While the company did pay out a portion of its dividend in the past, it currently doesn't pay a regular dividend. We infer that the company has been reinvesting all of its profits to grow its business.

Conclusion

In total, we are pretty happy with G & M Holdings' performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. So far, we've only made a quick discussion around the company's earnings growth. To gain further insights into G & M Holdings' past profit growth, check out this visualization of past earnings, revenue and cash flows.