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Could The Market Be Wrong About Sri Lotus Developers and Realty Limited (NSE:LOTUSDEV) Given Its Attractive Financial Prospects?

Simply Wall St · 4d ago

With its stock down 8.8% over the past three months, it is easy to disregard Sri Lotus Developers and Realty (NSE:LOTUSDEV). However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. In this article, we decided to focus on Sri Lotus Developers and Realty's ROE.

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?

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 Sri Lotus Developers and Realty is:

12% = ₹2.1b ÷ ₹17b (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 ₹0.12 in profit.

See our latest analysis for Sri Lotus Developers and Realty

Why Is ROE Important For Earnings Growth?

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

A Side By Side comparison of Sri Lotus Developers and Realty's Earnings Growth And 12% ROE

When you first look at it, Sri Lotus Developers and Realty's ROE doesn't look that attractive. Although a closer study shows that the company's ROE is higher than the industry average of 6.9% which we definitely can't overlook. Particularly, the substantial 50% net income growth seen by Sri Lotus Developers and Realty over the past five years is impressive . That being said, the company does have a slightly low ROE to begin with, just that it is higher than the industry average. Therefore, the growth in earnings could also be the result of other factors. E.g the company has a low payout ratio or could belong to a high growth industry.

As a next step, we compared Sri Lotus Developers and Realty's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 28%.

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

Earnings growth is an important metric to consider when valuing a stock. 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. Is Sri Lotus Developers and Realty fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Sri Lotus Developers and Realty Making Efficient Use Of Its Profits?

Given that Sri Lotus Developers and Realty 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

In total, we are pretty happy with Sri Lotus Developers and Realty's performance. In particular, it's great to see that the company has seen significant growth in its earnings backed by a respectable ROE and a high reinvestment rate. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.