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Has Kody Technolab Limited's (NSE:KODYTECH) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

Simply Wall St · 5d ago

Kody Technolab's (NSE:KODYTECH) stock is up by a considerable 50% over the past three months. 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 Kody Technolab's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How Do You Calculate Return On Equity?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Kody Technolab is:

11% = ₹119m ÷ ₹1.1b (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. Another way to think of that is that for every ₹1 worth of equity, the company was able to earn ₹0.11 in profit.

See our latest analysis for Kody Technolab

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

A Side By Side comparison of Kody Technolab's Earnings Growth And 11% ROE

When you first look at it, Kody Technolab's ROE doesn't look that attractive. Next, when compared to the average industry ROE of 15%, the company's ROE leaves us feeling even less enthusiastic. Despite this, surprisingly, Kody Technolab saw an exceptional 50% net income growth over the past five years. Therefore, there could be other reasons behind this growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that Kody Technolab's growth is quite high when compared to the industry average growth of 26% in the same period, which is great to see.

past-earnings-growth
NSEI:KODYTECH Past Earnings Growth January 8th 2026

Earnings growth is a huge factor in stock valuation. 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 Kody Technolab fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Kody Technolab Using Its Retained Earnings Effectively?

Given that Kody Technolab doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Summary

Overall, we feel that Kody Technolab certainly does have some positive factors to consider. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. 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. Our risks dashboard would have the 2 risks we have identified for Kody Technolab.