Atlantic Navigation Holdings (Singapore) (Catalist:5UL) has had a great run on the share market with its stock up by a significant 21% over the last month. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Specifically, we decided to study Atlantic Navigation Holdings (Singapore)'s ROE in this article.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

See our latest analysis for Atlantic Navigation Holdings (Singapore)

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 Atlantic Navigation Holdings (Singapore) is:

18% = US$18m ÷ US$100m (Based on the trailing twelve months to December 2023).

The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each SGD1 of shareholders' capital it has, the company made SGD0.18 in profit.

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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. 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 Atlantic Navigation Holdings (Singapore)'s Earnings Growth And 18% ROE

To start with, Atlantic Navigation Holdings (Singapore)'s ROE looks acceptable. Especially when compared to the industry average of 5.9% the company's ROE looks pretty impressive. Probably as a result of this, Atlantic Navigation Holdings (Singapore) was able to see an impressive net income growth of 56% over the last five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

We then compared Atlantic Navigation Holdings (Singapore)'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 41% in the same 5-year period.