Is Daifuku Co., Ltd.'s (TSE:6383) Recent Performance Tethered To Its Attractive Financial Prospects?

Simply Wall St · 04/07 00:28

Daifuku's (TSE:6383) stock is up by 8.2% over the past three months. 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 Daifuku's ROE in this article.

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.

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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 Daifuku is:

18% = JP¥73b ÷ JP¥398b (Based on the trailing twelve months to December 2024).

The 'return' is the yearly profit. That means that for every ¥1 worth of shareholders' equity, the company generated ¥0.18 in profit.

View our latest analysis for Daifuku

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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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.

Daifuku's Earnings Growth And 18% ROE

At first glance, Daifuku seems to have a decent ROE. Especially when compared to the industry average of 7.5% the company's ROE looks pretty impressive. Probably as a result of this, Daifuku was able to see a decent growth of 16% over the last five years.

As a next step, we compared Daifuku's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 14% in the same period.

past-earnings-growth
TSE:6383 Past Earnings Growth April 7th 2025

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Has the market priced in the future outlook for 6383? You can find out in our latest intrinsic value infographic research report.

Is Daifuku Making Efficient Use Of Its Profits?

Daifuku has a three-year median payout ratio of 32%, which implies that it retains the remaining 68% of its profits. This suggests that its dividend is well covered, and given the decent growth seen by the company, it looks like management is reinvesting its earnings efficiently.

Additionally, Daifuku has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders.

Summary

Overall, we are quite pleased with Daifuku's 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. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. 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.