Globetronics Technology Bhd (KLSE:GTRONIC) has had a rough three months with its share price down 15%. It is possible that the markets have ignored the company’s differing financials and decided to lean-in to the negative sentiment. Fundamentals usually dictate market outcomes so it makes sense to study the company’s financials. Specifically, we decided to study Globetronics Technology Bhd’s ROE in this article.
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.
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 Globetronics Technology Bhd is:
1.7% = RM5.2m ÷ RM308m (Based on the trailing twelve months to March 2025).
The ‘return’ is the yearly profit. That means that for every MYR1 worth of shareholders’ equity, the company generated MYR0.02 in profit.
Check out our latest analysis for Globetronics Technology Bhd
So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. 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.
As you can see, Globetronics Technology Bhd’s ROE looks pretty weak. Not just that, even compared to the industry average of 6.2%, the company’s ROE is entirely unremarkable. Therefore, it might not be wrong to say that the five year net income decline of 23% seen by Globetronics Technology Bhd was possibly a result of it having a lower ROE. We believe that there also might be other aspects that are negatively influencing the company’s earnings prospects. For example, the business has allocated capital poorly, or that the company has a very high payout ratio.
Furthermore, even when compared to the industry, which has been shrinking its earnings at a rate of 6.7% over the last few years, we found that Globetronics Technology Bhd’s performance is pretty disappointing, as it suggests that the company has been shrunk its earnings at a rate faster than the industry.
