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Declining Stock and Decent Financials: Is The Market Wrong About Dhanlaxmi Crop Science Limited (NSE:DHANLAXMI)?

Simply Wall St · 2d ago

Dhanlaxmi Crop Science (NSE:DHANLAXMI) has had a rough three months with its share price down 29%. But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. In this article, we decided to focus on Dhanlaxmi Crop Science's ROE.

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 ROE is:

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

So, based on the above formula, the ROE for Dhanlaxmi Crop Science is:

10% = ₹51m ÷ ₹506m (Based on the trailing twelve months to September 2025).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.10 in profit.

Check out our latest analysis for Dhanlaxmi Crop Science

Why Is ROE Important For Earnings Growth?

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

Dhanlaxmi Crop Science's Earnings Growth And 10% ROE

When you first look at it, Dhanlaxmi Crop Science's ROE doesn't look that attractive. Yet, a closer study shows that the company's ROE is similar to the industry average of 11%. Particularly, the exceptional 37% net income growth seen by Dhanlaxmi Crop Science over the past five years is pretty remarkable. Given the slightly low ROE, it is likely that there could be some other aspects that are driving this growth. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Dhanlaxmi Crop Science's 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 20% in the same 5-year period.

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

Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Dhanlaxmi Crop Science's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Dhanlaxmi Crop Science Efficiently Re-investing Its Profits?

Dhanlaxmi Crop Science 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

On the whole, we do feel that Dhanlaxmi Crop Science has some positive attributes. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. Our risks dashboard would have the 3 risks we have identified for Dhanlaxmi Crop Science.