It is hard to get excited after looking at AB Dynamics’ (LON:ABDP) recent performance, when its stock has declined 6.3% over the past month. But if you pay close attention, you might find that its key financial indicators look quite decent, which could mean that the stock could potentially rise in the long-term given how markets usually reward more resilient long-term fundamentals. Specifically, we decided to study AB Dynamics’ 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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
How Is ROE Calculated?
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 AB Dynamics is:
2.8% = UK£2.9m ÷ UK£103m (Based on the trailing twelve months to February 2021).
The ‘return’ is the amount earned after…