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Will Weakness in Keisei Electric Railway Co., Ltd.'s (TSE:9009) Stock Prove Temporary Given Strong Fundamentals?

Simply Wall St · 1d ago

With its stock down 5.5% over the past three months, it is easy to disregard Keisei Electric Railway (TSE:9009). But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Keisei Electric Railway's 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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

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 Keisei Electric Railway is:

13% = JP¥74b ÷ JP¥550b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. That means that for every ¥1 worth of shareholders' equity, the company generated ¥0.13 in profit.

Check out our latest analysis for Keisei Electric Railway

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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.

Keisei Electric Railway's Earnings Growth And 13% ROE

To start with, Keisei Electric Railway's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 7.2%. Probably as a result of this, Keisei Electric Railway was able to see an impressive net income growth of 62% over the last five years. However, there could also be other causes behind this growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared Keisei Electric Railway's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 45%.

past-earnings-growth
TSE:9009 Past Earnings Growth December 18th 2025

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Keisei Electric Railway fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Keisei Electric Railway Using Its Retained Earnings Effectively?

Keisei Electric Railway has a really low three-year median payout ratio of 10%, meaning that it has the remaining 90% left over to reinvest into its business. So it looks like Keisei Electric Railway is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Moreover, Keisei Electric Railway 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.

Conclusion

In total, we are pretty happy with Keisei Electric Railway's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. With that said, on studying the latest analyst forecasts, we found that while the company has seen growth in its past earnings, analysts expect its future earnings to shrink. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.