SiteOne Landscape Supply (NYSE: SITE) has performed very well in the equity market with a significant 19% increase in stocks over the 3 months. Given the company’s impressive performance, we need to take a closer look at its monetary indicators, such as a company’s long-term monetary fitness regularly dictates market outcomes. In particular, today we will pay close attention to the ROE of SiteOne Landscape Supply.
The return on equity or ROE is something vital for a shareholder because it tells him how well his capital is reinvested, that is, it is a return index that measures the rate of return on capital contributed through the shareholders of the company.
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Roe can be calculated with the formula:
Return on equity = Net source of income (from ongoing operations) ÷ Equity
Therefore, in the above formula, the ROE of siteOne Landscape Supply is:
20% = US$191 million ÷ US$937 million (based on the twelve months to July 2021).
The “return” is the source of income that the company has obtained in the previous year. Another way to look at this is that for every dollar of capital, the company can make $0. 20 in profits.
We have already established that ROE is an effective indicator of profit generation for a company’s long-term profits. Now we want to evaluate the benefits that the company reinvests or “retains” for its long-term expansion, which then provides us with a concept of the company. potential for expansion. Generally speaking, all other things being equal, corporations with a higher margin on equity and profit retention have a higher rate of expansion than corporations that have a percentage of those attributes.
For starters, SiteOne Landscape Supply turns out to have a respectable ROE. Especially compared to the industry average of 16%, the company’s ROE looks pretty impressive. This has likely laid the groundwork for SiteOne Landscape Supply’s significant 54% net revenue stream. expansion during the more than five years. There may also be other facets that definitely influence the expansion of the company’s profits, such as withholding maximum profits or effective control instead.
In the next step, we looked at SiteOne Landscape Supply’s net income expansion with the industry and fortunately found that the expansion noticed across the company is outsteer than the industry average expansion of 13%.
Profit expansion is a vital factor when comparing an inventory. What investors want is to know whether the expected expansion of earnings, or the lack of it, is already worth it, which will help them if the long term of the inventory looks promising or threatening. The expected expansion indicator of earnings is the P/E ratio, which is the value the market is willing to pay for an inventory based on its profit outlook. a low P/E, compared to your industry.
SiteOne Landscape Supply lately will not pay dividends, which necessarily means that it has reinvested all of its profits in the company, which contributes to the expansion of the largest amount of profit we discussed above.
Overall, we think the functionality of SiteOne Landscape Supply has been pretty good. In particular, it is wonderful to see that the company is making a strong investment in its business and with a maximum rate of return, which has resulted in a significant expansion of its profits. That said, the most recent forecasts from industry analysts reveal that the company’s earnings expansion is expected to slow. To be more informed about the company’s long-term earnings expansion forecasts, check out this forecast report from the company’s analysts to be more informed.
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