Beacon Minerals Limited's (ASX:BCN) Fundamentals Look Pretty...

Beacon Minerals Limited's (ASX:BCN) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock? - article in simplywallst.

Link - https://**.st/stocks/au/materials/asx-bcn/beacon-minerals-shares/news/beacon-minerals-limiteds-asxbcn-fundamentals-look-pretty-str

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It is hard to get excited after looking at Beacon Minerals' (ASX:BCN) recent performance, when its stock has declined 10.0% over the past week. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Beacon Minerals' ROE today.

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.

Check out our latest analysis for Beacon Minerals

How To 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 Beacon Minerals is:

25% = AU$15m ÷ AU$59m (Based on the trailing twelve months to June 2022).

The 'return' is the amount earned after tax over the last twelve months. That means that for every A$1 worth of shareholders' equity, the company generated A$0.25 in profit.

What Has ROE Got To Do With 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.

Beacon Minerals' Earnings Growth And 25% ROE

Firstly, we acknowledge that Beacon Minerals has a significantly high ROE. Second, a comparison with the average ROE reported by the industry of 16% also doesn't go unnoticed by us. Under the circumstances, Beacon Minerals' considerable five year net income growth of 53% was to be expected.

We then compared Beacon Minerals' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 34% in the same period.

ASX:BCN Past Earnings Growth February 13th 2023