Will Weakness in Shree Pushkar Chemicals & Fertilisers Limited's (NSE:SHREEPUSHK) Stock Prove Temporary Given Strong Fundamentals?

With its stock down 16% over the past three months, it is easy to disregard Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK). But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Specifically, we decided to study Shree Pushkar Chemicals & Fertilisers' 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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Do You 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 Shree Pushkar Chemicals & Fertilisers is:

12% = ₹716m ÷ ₹5.8b (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. So, this means that for every ₹1 of its shareholder's investments, the company generates a profit of ₹0.12.

See our latest analysis for Shree Pushkar Chemicals & Fertilisers

What Is The Relationship Between ROE And Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

Shree Pushkar Chemicals & Fertilisers' Earnings Growth And 12% ROE

On the face of it, Shree Pushkar Chemicals & Fertilisers' ROE is not much to talk about. However, the fact that the its ROE is quite higher to the industry average of 9.9% doesn't go unnoticed by us. This certainly adds some context to Shree Pushkar Chemicals & Fertilisers' moderate 10% net income growth seen over the past five years. That being said, the company does have a slightly low ROE to begin with, just that it is higher than the industry average. Therefore, the growth in earnings could also be the result of other factors. E.g the company has a low payout ratio or could belong to a high growth industry.

We then performed a comparison between Shree Pushkar Chemicals & Fertilisers' net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 8.8% in the same 5-year period.

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. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Shree Pushkar Chemicals & Fertilisers''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Shree Pushkar Chemicals & Fertilisers Efficiently Re-investing Its Profits?

Shree Pushkar Chemicals & Fertilisers' three-year median payout ratio to shareholders is 13% (implying that it retains 87% of its income), which is on the lower side, so it seems like the management is reinvesting profits heavily to grow its business.

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

Conclusion

In total, we are pretty happy with Shree Pushkar Chemicals & Fertilisers' performance. Specifically, we like that it has been reinvesting a high portion of its profits at a moderate rate of return, resulting in earnings expansion. 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. To know the 1 risk we have identified for Shree Pushkar Chemicals & Fertilisers visit our risks dashboard for free.

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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.