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Is ASSA ABLOY AB (publ)'s (STO:ASSA B) Latest Stock Performance Being Led By Its Strong Fundamentals?

Simply Wall St · 3d ago

Most readers would already know that ASSA ABLOY's (STO:ASSA B) stock increased by 8.3% over the past three months. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. In this article, we decided to focus on ASSA ABLOY's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How Do You 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 ASSA ABLOY is:

14% = kr15b ÷ kr103b (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 SEK1 worth of shareholders' equity, the company generated SEK0.14 in profit.

See our latest analysis for ASSA ABLOY

What Is The Relationship Between ROE And 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.

ASSA ABLOY's Earnings Growth And 14% ROE

To start with, ASSA ABLOY's ROE looks acceptable. On comparing with the average industry ROE of 12% the company's ROE looks pretty remarkable. This probably laid the ground for ASSA ABLOY's moderate 9.7% net income growth seen over the past five years.

As a next step, we compared ASSA ABLOY's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 9.7% in the same period.

past-earnings-growth
OM:ASSA B Past Earnings Growth December 22nd 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). Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for ASSA B? You can find out in our latest intrinsic value infographic research report.

Is ASSA ABLOY Efficiently Re-investing Its Profits?

ASSA ABLOY has a healthy combination of a moderate three-year median payout ratio of 41% (or a retention ratio of 59%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits.

Besides, ASSA ABLOY has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 40% of its profits over the next three years. As a result, ASSA ABLOY's ROE is not expected to change by much either, which we inferred from the analyst estimate of 15% for future ROE.

Conclusion

In total, we are pretty happy with ASSA ABLOY'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. With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.