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Novatech Industries' (EPA:MLNOV) Stock Is Going Strong: Have Financials A Role To Play?

Simply Wall St · 12/30/2025 04:18

Novatech Industries (EPA:MLNOV) has had a great run on the share market with its stock up by a significant 10.0% over the last week. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. In this article, we decided to focus on Novatech Industries' 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 ROE is:

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

So, based on the above formula, the ROE for Novatech Industries is:

2.7% = €314k ÷ €12m (Based on the trailing twelve months to December 2024).

The 'return' is the yearly profit. That means that for every €1 worth of shareholders' equity, the company generated €0.03 in profit.

Check out our latest analysis for Novatech Industries

Why Is ROE Important For Earnings Growth?

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

Novatech Industries' Earnings Growth And 2.7% ROE

It is hard to argue that Novatech Industries' ROE is much good in and of itself. Even when compared to the industry average of 4.8%, the ROE figure is pretty disappointing. Therefore, the disappointing ROE therefore provides a background to Novatech Industries' very little net income growth of 4.4% over the past five years.

As a next step, we compared Novatech Industries' 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 4.2% in the same period.

past-earnings-growth
ENXTPA:MLNOV Past Earnings Growth December 30th 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. This then helps them determine if the stock is placed for a bright or bleak future. Is Novatech Industries fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Novatech Industries Using Its Retained Earnings Effectively?

Novatech Industries doesn't pay any regular dividends, meaning that potentially all of its profits are being reinvested in the business. However, this doesn't explain the low earnings growth the company has seen. So there could be some other explanation in that regard. For instance, the company's business may be deteriorating.

Conclusion

Overall, we feel that Novatech Industries certainly does have some positive factors to consider. Namely, its respectable earnings growth, which it achieved due to it retaining most of its profits. However, given the low ROE, investors may not be benefitting from all that reinvestment after all. 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. You can see the 3 risks we have identified for Novatech Industries by visiting our risks dashboard for free on our platform here.