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Is Hankook Cosmetics Co., Ltd.'s (KRX:123690) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Simply Wall St · 5d ago

Hankook Cosmetics' (KRX:123690) stock is up by a considerable 28% over the past week. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Hankook Cosmetics' 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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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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 Hankook Cosmetics is:

13% = ₩4.6b ÷ ₩34b (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. That means that for every ₩1 worth of shareholders' equity, the company generated ₩0.13 in profit.

View our latest analysis for Hankook Cosmetics

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.

Hankook Cosmetics' Earnings Growth And 13% ROE

To start with, Hankook Cosmetics' ROE looks acceptable. Especially when compared to the industry average of 6.4% the company's ROE looks pretty impressive. This certainly adds some context to Hankook Cosmetics' exceptional 65% net income growth seen over the past five years. We reckon that there could also be other factors at play here. 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.

Next, on comparing with the industry net income growth, we found that Hankook Cosmetics' growth is quite high when compared to the industry average growth of 24% in the same period, which is great to see.

past-earnings-growth
KOSE:A123690 Past Earnings Growth January 2nd 2026

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). Doing so will help them establish if the stock's future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Hankook Cosmetics is trading on a high P/E or a low P/E, relative to its industry.

Is Hankook Cosmetics Using Its Retained Earnings Effectively?

Hankook Cosmetics 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.

Conclusion

In total, we are pretty happy with Hankook Cosmetics' performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. You can see the 1 risk we have identified for Hankook Cosmetics by visiting our risks dashboard for free on our platform here.