Australia markets close in 1 hour 7 minutes
  • ALL ORDS

    7,731.90
    +3.40 (+0.04%)
     
  • ASX 200

    7,420.40
    +5.00 (+0.07%)
     
  • AUD/USD

    0.7478
    +0.0008 (+0.11%)
     
  • OIL

    82.25
    -0.25 (-0.30%)
     
  • GOLD

    1,787.80
    +5.90 (+0.33%)
     
  • BTC-AUD

    84,562.10
    -2,989.45 (-3.41%)
     
  • CMC Crypto 200

    1,504.23
    -30.42 (-1.98%)
     
  • AUD/EUR

    0.6429
    +0.0007 (+0.11%)
     
  • AUD/NZD

    1.0434
    +0.0002 (+0.02%)
     
  • NZX 50

    13,100.69
    -25.29 (-0.19%)
     
  • NASDAQ

    15,489.59
    +100.88 (+0.66%)
     
  • FTSE

    7,190.30
    -32.80 (-0.45%)
     
  • Dow Jones

    35,603.08
    -6.26 (-0.02%)
     
  • DAX

    15,472.56
    -50.36 (-0.32%)
     
  • Hang Seng

    26,120.64
    +103.11 (+0.40%)
     
  • NIKKEI 225

    28,925.86
    +217.28 (+0.76%)
     

Is eXp World Holdings, Inc.'s(NASDAQ:EXPI) Recent Stock Performance Tethered To Its Strong Fundamentals?

  • Oops!
    Something went wrong.
    Please try again later.
·3-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

eXp World Holdings' (NASDAQ:EXPI) stock is up by a considerable 27% 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. In this article, we decided to focus on eXp World Holdings' ROE.

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. Put another way, it reveals the company's success at turning shareholder investments into profits.

See our latest analysis for eXp World Holdings

How Is ROE Calculated?

ROE can be calculated by using the formula:

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

So, based on the above formula, the ROE for eXp World Holdings is:

37% = US$65m ÷ US$172m (Based on the trailing twelve months to June 2021).

The 'return' is the yearly profit. One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.37 in profit.

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.

eXp World Holdings' Earnings Growth And 37% ROE

First thing first, we like that eXp World Holdings has an impressive ROE. Additionally, the company's ROE is higher compared to the industry average of 9.3% which is quite remarkable. As a result, eXp World Holdings' exceptional 48% net income growth seen over the past five years, doesn't come as a surprise.

As a next step, we compared eXp World Holdings' net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 6.4%.

past-earnings-growth
past-earnings-growth

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Has the market priced in the future outlook for EXPI? You can find out in our latest intrinsic value infographic research report.

Is eXp World Holdings Making Efficient Use Of Its Profits?

Summary

Overall, we are quite pleased with eXp World Holdings' performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting