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SimFabric S.A.'s (WSE:SIM) Stock Is Rallying But Financials Look Ambiguous: Will The Momentum Continue?

Simply Wall St · 2d ago

SimFabric's (WSE:SIM) stock is up by a considerable 12% over the past week. But the company's key financial indicators appear to be differing across the board and that makes us question whether or not the company's current share price momentum can be maintained. In this article, we decided to focus on SimFabric's ROE.

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?

The formula for ROE is:

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

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

7.8% = zł1.7m ÷ zł22m (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. That means that for every PLN1 worth of shareholders' equity, the company generated PLN0.08 in profit.

Check out our latest analysis for SimFabric

What Is The Relationship Between ROE And Earnings Growth?

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

SimFabric's Earnings Growth And 7.8% ROE

When you first look at it, SimFabric's ROE doesn't look that attractive. Next, when compared to the average industry ROE of 19%, the company's ROE leaves us feeling even less enthusiastic. Therefore, it might not be wrong to say that the five year net income decline of 42% seen by SimFabric was probably the result of it having a lower ROE. However, there could also be other factors causing the earnings to decline. Such as - low earnings retention or poor allocation of capital.

Next, when we compared with the industry, which has shrunk its earnings at a rate of 4.2% in the same 5-year period, we still found SimFabric's performance to be quite bleak, because the company has been shrinking its earnings faster than the industry.

past-earnings-growth
WSE:SIM Past Earnings Growth January 8th 2026

Earnings growth is an important metric to consider when valuing a stock. 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. If you're wondering about SimFabric's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is SimFabric Making Efficient Use Of Its Profits?

SimFabric doesn't pay any regular dividends, meaning that potentially all of its profits are being reinvested in the business, which doesn't explain why the company's earnings have shrunk if it is retaining all of its profits. So there might be other factors at play here which could potentially be hampering growth. For example, the business has faced some headwinds.

Summary

In total, we're a bit ambivalent about SimFabric's performance. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. Wrapping up, we would proceed with caution with this company and one way of doing that would be to look at the risk profile of the business. You can see the 5 risks we have identified for SimFabric by visiting our risks dashboard for free on our platform here.