Bijou Brigitte modische Accessoires' (ETR:BIJ) stock is up by 2.5% over the past month. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. Particularly, we will be paying attention to Bijou Brigitte modische Accessoires' ROE today.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits.

See our latest analysis for Bijou Brigitte modische Accessoires

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 Bijou Brigitte modische Accessoires is:

10% = €24m ÷ €240m (Based on the trailing twelve months to December 2023).

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 €0.10 in profit.

What Has ROE Got To Do With 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.

Bijou Brigitte modische Accessoires' Earnings Growth And 10% ROE

To begin with, Bijou Brigitte modische Accessoires seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 7.0%. This certainly adds some context to Bijou Brigitte modische Accessoires' decent 19% net income growth seen over the past five years.

We then compared Bijou Brigitte modische Accessoires' 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 13% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Bijou Brigitte modische Accessoires''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.