Is the Market Following Fundamentals?
Most readers would already be aware that MoneyMax Financial Services’ (Catalist:5WJ) stock increased significantly by 15% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. In this article, we decided to focus on MoneyMax Financial Services’ ROE.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.
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 MoneyMax Financial Services is:
21% = S$42m ÷ S$199m (Based on the trailing twelve months to December 2024).
The ‘return’ is the income the business earned over the last year. One way to conceptualize this is that for each SGD1 of shareholders’ capital it has, the company made SGD0.21 in profit.
Check out our latest analysis for MoneyMax Financial Services
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.
To begin with, MoneyMax Financial Services seems to have a respectable ROE. Further, the company’s ROE compares quite favorably to the industry average of 15%. Probably as a result of this, MoneyMax Financial Services was able to see a decent growth of 17% over the last five years.
We then performed a comparison between MoneyMax Financial Services’ net income growth with the industry, which revealed that the company’s growth is similar to the average industry growth of 19% in the same 5-year period.
Catalist:5WJ Past Earnings Growth April 11th 2025
Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. If you’re wondering about MoneyMax Financial Services”s valuation, check out this gauge of its price-to-earnings ratio , as compared to its industry.
Story Continues
MoneyMax Financial Services has a low three-year median payout ratio of 20%, meaning that the company retains the remaining 80% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.
Moreover, MoneyMax Financial Services is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.
On the whole, we feel that MoneyMax Financial Services’ performance has been quite good. In particular, it’s great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Remember, the price of a stock is also dependent on the perceived risk. Therefore investors must keep themselves informed about the risks involved before investing in any company. Our risks dashboard will have the 1 risk we have identified for MoneyMax Financial Services.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
