Fevertree Drinks PLC’s (LON:FEVR) On An Uptrend But Financial Prospects Look Pretty Weak: Is The Stock Overpriced?
How did your country report this? Share your view in the comments.
Diverging Reports Breakdown
Fevertree Drinks PLC’s (LON:FEVR) On An Uptrend But Financial Prospects Look Pretty Weak: Is The Stock Overpriced?
Fevertree Drinks (LON:FEVR) has had a great run on the share market with its stock up by a significant 30% over the last three months. We decided to pay close attention to its weak financials as we are doubtful that the current momentum will keep up, given the scenario. In this article, we focus on the company’s return on equity, or return on Equity. The ROE is used to assess the profitability of a company in relation to its equity capital. For every £1 worth of shareholders’ equity, the company generated £0.10 in profit.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
Trump has pledged to “unleash” American oil and gas and these 15 US stocks have developments that are poised to benefit.
How Is ROE Calculated?
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 Fevertree Drinks is:
9.9% = UK£24m ÷ UK£247m (Based on the trailing twelve months to December 2024).
The ‘return’ is the income the business earned over the last year. That means that for every £1 worth of shareholders’ equity, the company generated £0.10 in profit.
Check out our latest analysis for Fevertree Drinks
What Is The Relationship Between ROE And Earnings Growth?
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.
Fevertree Drinks’ Earnings Growth And 9.9% ROE
At first glance, Fevertree Drinks’ ROE doesn’t look very promising. A quick further study shows that the company’s ROE doesn’t compare favorably to the industry average of 13% either. For this reason, Fevertree Drinks’ five year net income decline of 24% is not surprising given its lower ROE. However, there could also be other factors causing the earnings to decline. For instance, the company has a very high payout ratio, or is faced with competitive pressures.
However, when we compared Fevertree Drinks’ growth with the industry we found that while the company’s earnings have been shrinking, the industry has seen an earnings growth of 9.5% in the same period. This is quite worrisome.
Fevertree Drinks PLC’s (LON:FEVR) On An Uptrend But Financial Prospects Look Pretty Weak: Is The Stock Overpriced?
Fevertree Drinks (LON:FEVR) has had a great run on the share market with its stock up by a significant 30% over the last three months. We decided to pay close attention to its weak financials as we are doubtful that the current momentum will keep up, given the scenario. In this article, we focus on the company’s return on equity, or return on Equity. The ROE is used to assess the profitability of a company in relation to its equity capital. For every £1 worth of shareholders’ equity, the company generated £0.10 in profit.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
Trump has pledged to “unleash” American oil and gas and these 15 US stocks have developments that are poised to benefit.
How Is ROE Calculated?
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 Fevertree Drinks is:
9.9% = UK£24m ÷ UK£247m (Based on the trailing twelve months to December 2024).
The ‘return’ is the income the business earned over the last year. That means that for every £1 worth of shareholders’ equity, the company generated £0.10 in profit.
Check out our latest analysis for Fevertree Drinks
What Is The Relationship Between ROE And Earnings Growth?
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.
Fevertree Drinks’ Earnings Growth And 9.9% ROE
At first glance, Fevertree Drinks’ ROE doesn’t look very promising. A quick further study shows that the company’s ROE doesn’t compare favorably to the industry average of 13% either. For this reason, Fevertree Drinks’ five year net income decline of 24% is not surprising given its lower ROE. However, there could also be other factors causing the earnings to decline. For instance, the company has a very high payout ratio, or is faced with competitive pressures.
However, when we compared Fevertree Drinks’ growth with the industry we found that while the company’s earnings have been shrinking, the industry has seen an earnings growth of 9.5% in the same period. This is quite worrisome.
Source: https://finance.yahoo.com/news/fevertree-drinks-plcs-lon-fevr-090241140.html