Australia markets closed
  • ALL ORDS

    7,413.10
    +73.80 (+1.01%)
     
  • ASX 200

    7,182.70
    +76.80 (+1.08%)
     
  • AUD/USD

    0.7163
    +0.0064 (+0.90%)
     
  • OIL

    115.07
    +0.98 (+0.86%)
     
  • GOLD

    1,850.60
    +3.00 (+0.16%)
     
  • BTC-AUD

    40,484.86
    +42.67 (+0.11%)
     
  • CMC Crypto 200

    625.79
    -3.71 (-0.59%)
     
  • AUD/EUR

    0.6670
    +0.0059 (+0.89%)
     
  • AUD/NZD

    1.0951
    +0.0003 (+0.03%)
     
  • NZX 50

    11,065.15
    -37.69 (-0.34%)
     
  • NASDAQ

    12,681.42
    +404.63 (+3.30%)
     
  • FTSE

    7,585.46
    +20.54 (+0.27%)
     
  • Dow Jones

    33,212.96
    +575.77 (+1.76%)
     
  • DAX

    14,462.19
    +230.90 (+1.62%)
     
  • Hang Seng

    20,697.36
    +581.16 (+2.89%)
     
  • NIKKEI 225

    26,781.68
    +176.84 (+0.66%)
     

uniQure N.V.'s (NASDAQ:QURE) Fundamentals Look Pretty Strong: Could The Market Be Wrong About The Stock?

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

uniQure (NASDAQ:QURE) has had a rough three months with its share price down 29%. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Particularly, we will be paying attention to uniQure's ROE today.

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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

See our latest analysis for uniQure

How To 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 uniQure is:

54% = US$321m ÷ US$591m (Based on the trailing twelve months to September 2021).

The 'return' is the profit over the last twelve months. That means that for every $1 worth of shareholders' equity, the company generated $0.54 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. 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 all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

uniQure's Earnings Growth And 54% ROE

Firstly, we acknowledge that uniQure has a significantly high ROE. Secondly, even when compared to the industry average of 15% the company's ROE is quite impressive. As a result, uniQure's exceptional 23% net income growth seen over the past five years, doesn't come as a surprise.

Next, on comparing uniQure's net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 22% in the same period.

past-earnings-growth
past-earnings-growth

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is uniQure fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is uniQure Using Its Retained Earnings Effectively?

uniQure doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

Conclusion

In total, we are pretty happy with uniQure's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. Having said that, on studying current analyst estimates, we were concerned to see that while the company has grown its earnings in the past, analysts expect its earnings to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.

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

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.

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