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Is Orkla ASA's (OB:ORK) Stock's Recent Performance A Reflection Of Its Financial Health?

Simply Wall St · 6d ago

Orkla's (OB:ORK) stock is up by 6.7% over the past three months. 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 Orkla's ROE in this article.

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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How Do You Calculate Return On Equity?

ROE can be calculated by using the formula:

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

So, based on the above formula, the ROE for Orkla is:

14% = kr6.9b ÷ kr49b (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. That means that for every NOK1 worth of shareholders' equity, the company generated NOK0.14 in profit.

View our latest analysis for Orkla

Why Is ROE Important For Earnings Growth?

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

Orkla's Earnings Growth And 14% ROE

At first glance, Orkla seems to have a decent ROE. Especially when compared to the industry average of 9.0% the company's ROE looks pretty impressive. Probably as a result of this, Orkla was able to see a decent growth of 7.0% over the last five years.

Given that the industry shrunk its earnings at a rate of 2.7% over the last few years, the net income growth of the company is quite impressive.

past-earnings-growth
OB:ORK Past Earnings Growth January 6th 2026

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. What is ORK worth today? The intrinsic value infographic in our free research report helps visualize whether ORK is currently mispriced by the market.

Is Orkla Efficiently Re-investing Its Profits?

Orkla has a significant three-year median payout ratio of 58%, meaning that it is left with only 42% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.

Besides, Orkla has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 62%. Still, forecasts suggest that Orkla's future ROE will rise to 19% even though the the company's payout ratio is not expected to change by much.

Summary

Overall, we are quite pleased with Orkla's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. Having said that, on studying current analyst estimates, we were concerned to see that while the company has grown its earnings in the past, analysts expect its earnings to shrink in the future. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.