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    SILICON2 Co., Ltd.'s (KOSDAQ:257720) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

    Simply Wall St·07/28/2025 21:32:13
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    Most readers would already be aware that SILICON2's (KOSDAQ:257720) stock increased significantly by 33% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Specifically, we decided to study SILICON2'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. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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    How Is ROE Calculated?

    Return on equity 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 SILICON2 is:

    41% = ₩134b ÷ ₩327b (Based on the trailing twelve months to March 2025).

    The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each ₩1 of shareholders' capital it has, the company made ₩0.41 in profit.

    Check out our latest analysis for SILICON2

    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. 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.

    A Side By Side comparison of SILICON2's Earnings Growth And 41% ROE

    First thing first, we like that SILICON2 has an impressive ROE. Second, a comparison with the average ROE reported by the industry of 6.0% also doesn't go unnoticed by us. So, the substantial 75% net income growth seen by SILICON2 over the past five years isn't overly surprising.

    We then compared SILICON2's 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 18% in the same 5-year period.

    past-earnings-growth
    KOSDAQ:A257720 Past Earnings Growth July 28th 2025

    The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. Is SILICON2 fairly valued compared to other companies? These 3 valuation measures might help you decide.

    Is SILICON2 Making Efficient Use Of Its Profits?

    SILICON2 doesn't pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

    Summary

    On the whole, we feel that SILICON2's performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.