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Do Its Financials Have Any Role To Play In Driving Orient Ceratech Limited's (NSE:ORIENTCER) Stock Up Recently?

Simply Wall St · 12/31/2025 00:16

Orient Ceratech (NSE:ORIENTCER) has had a great run on the share market with its stock up by a significant 41% over the last three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Specifically, we decided to study Orient Ceratech's ROE in this article.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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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 Orient Ceratech is:

5.8% = ₹170m ÷ ₹2.9b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. That means that for every ₹1 worth of shareholders' equity, the company generated ₹0.06 in profit.

See our latest analysis for Orient Ceratech

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. 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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Orient Ceratech's Earnings Growth And 5.8% ROE

It is hard to argue that Orient Ceratech's ROE is much good in and of itself. Not just that, even compared to the industry average of 9.7%, the company's ROE is entirely unremarkable. Orient Ceratech was still able to see a decent net income growth of 7.5% over the past five years. Therefore, the growth in earnings could probably have been caused by other variables. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

As a next step, we compared Orient Ceratech's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 24% in the same period.

past-earnings-growth
NSEI:ORIENTCER Past Earnings Growth December 31st 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is Orient Ceratech fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Orient Ceratech Making Efficient Use Of Its Profits?

Orient Ceratech has a low three-year median payout ratio of 21%, meaning that the company retains the remaining 79% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.

Moreover, Orient Ceratech 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

Overall, we feel that Orient Ceratech certainly does have some positive factors to consider. Specifically, its fairly high earnings growth number, which no doubt was backed by the company's high earnings retention. Still, the low ROE means that all that reinvestment is not reaping a lot of benefit to the investors. 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. To know the 3 risks we have identified for Orient Ceratech visit our risks dashboard for free.