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Grand Korea Leisure Co., Ltd.'s (KRX:114090) Stock Has Been Sliding But Fundamentals Look Strong: Is The Market Wrong?

Simply Wall St · 5d ago

With its stock down 12% over the past three months, it is easy to disregard Grand Korea Leisure (KRX:114090). However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Grand Korea Leisure's ROE in this article.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Is ROE Calculated?

Return on equity 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 Grand Korea Leisure is:

12% = ₩53b ÷ ₩444b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. So, this means that for every ₩1 of its shareholder's investments, the company generates a profit of ₩0.12.

Check out our latest analysis for Grand Korea Leisure

What Has ROE Got To Do With Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.

Grand Korea Leisure's Earnings Growth And 12% ROE

To start with, Grand Korea Leisure's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 7.9%. Probably as a result of this, Grand Korea Leisure was able to see an impressive net income growth of 62% over the last 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 Grand Korea Leisure's growth is quite high when compared to the industry average growth of 45% in the same period, which is great to see.

past-earnings-growth
KOSE:A114090 Past Earnings Growth January 7th 2026

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Grand Korea Leisure's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Grand Korea Leisure Efficiently Re-investing Its Profits?

Grand Korea Leisure has a significant three-year median payout ratio of 51%, meaning the company only retains 49% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.

Besides, Grand Korea Leisure has been paying dividends over a period of six years. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 54%. Regardless, Grand Korea Leisure's ROE is speculated to decline to 9.3% despite there being no anticipated change in its payout ratio.

Summary

Overall, we are quite pleased with Grand Korea Leisure's performance. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that's probably a good sign. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.