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    Is NOF Corporation's (TSE:4403) Recent Stock Performance Tethered To Its Strong Fundamentals?

    Simply Wall St·01/05/2026 21:29:09
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    NOF's (TSE:4403) stock is up by a considerable 14% over the past three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study NOF's ROE in this article.

    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 ROE is:

    Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

    So, based on the above formula, the ROE for NOF is:

    12% = JP¥35b ÷ JP¥283b (Based on the trailing twelve months to September 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 ¥0.12 in profit.

    See our latest analysis for NOF

    What Has ROE Got To Do With Earnings Growth?

    So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 NOF's Earnings Growth And 12% ROE

    To start with, NOF's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 7.7%. Probably as a result of this, NOF was able to see a decent growth of 9.4% over the last five years.

    We then compared NOF'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 7.2% in the same 5-year period.

    past-earnings-growth
    TSE:4403 Past Earnings Growth January 5th 2026

    The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. Has the market priced in the future outlook for 4403? You can find out in our latest intrinsic value infographic research report.

    Is NOF Using Its Retained Earnings Effectively?

    With a three-year median payout ratio of 27% (implying that the company retains 73% of its profits), it seems that NOF is reinvesting efficiently in a way that it sees respectable amount growth in its earnings and pays a dividend that's well covered.

    Besides, NOF has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders.

    Summary

    Overall, we are quite pleased with NOF's performance. 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. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.