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Star Health and Allied Insurance Company Limited's (NSE:STARHEALTH) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

Simply Wall St · 2d ago

It is hard to get excited after looking at Star Health and Allied Insurance's (NSE:STARHEALTH) recent performance, when its stock has declined 8.8% over the past month. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. In this article, we decided to focus on Star Health and Allied Insurance's ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. 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 ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Star Health and Allied Insurance is:

7.0% = ₹5.3b ÷ ₹76b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every ₹1 of its shareholder's investments, the company generates a profit of ₹0.07.

Check out our latest analysis for Star Health and Allied Insurance

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. 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.

Star Health and Allied Insurance's Earnings Growth And 7.0% ROE

As you can see, Star Health and Allied Insurance's ROE looks pretty weak. Even when compared to the industry average of 10%, the ROE figure is pretty disappointing. In spite of this, Star Health and Allied Insurance was able to grow its net income considerably, at a rate of 47% in the last five years. We believe that there might be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Star Health and Allied Insurance's growth is quite high when compared to the industry average growth of 32% in the same period, which is great to see.

past-earnings-growth
NSEI:STARHEALTH Past Earnings Growth December 25th 2025

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Star Health and Allied Insurance fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Star Health and Allied Insurance Using Its Retained Earnings Effectively?

Star Health and Allied Insurance doesn't pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

Summary

In total, it does look like Star Health and Allied Insurance has some positive aspects to its business. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.