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    Jimoty, Inc.'s (TSE:7082) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

    Simply Wall St·04/10/2025 01:59:56
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    With its stock down 15% over the past month, it is easy to disregard Jimoty (TSE:7082). However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. In this article, we decided to focus on Jimoty's ROE.

    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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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    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 Jimoty is:

    35% = JP¥471m ÷ JP¥1.3b (Based on the trailing twelve months to December 2024).

    The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each ¥1 of shareholders' capital it has, the company made ¥0.35 in profit.

    See our latest analysis for Jimoty

    What Is The Relationship Between ROE And Earnings Growth?

    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 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.

    Jimoty's Earnings Growth And 35% ROE

    To begin with, Jimoty has a pretty high ROE which is interesting. Secondly, even when compared to the industry average of 13% the company's ROE is quite impressive. This likely paved the way for the modest 16% net income growth seen by Jimoty over the past five years.

    Next, on comparing Jimoty's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 17% over the last few years.

    past-earnings-growth
    TSE:7082 Past Earnings Growth April 10th 2025

    Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Jimoty is trading on a high P/E or a low P/E , relative to its industry.

    Is Jimoty Efficiently Re-investing Its Profits?

    Given that Jimoty doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

    Summary

    Overall, we are quite pleased with Jimoty's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.