The recent stock market performance of SITE Centers Corp. (NYSE: SITC) influenced by its fundamentals in any way?
SITE Centers (NYSE: SITC) shares rose 5.6% in the past month. Since stock prices are generally aligned with a company’s long-term financial performance, we decided to take a closer look at its financial metrics to see if they had a role to play in the recent price movement. . Specifically, we have decided to study the ROE of SITE centers in this article.
Return on equity or ROE is an important factor for a shareholder to consider because it tells them how effectively their capital is being reinvested. In simpler terms, it measures a company’s profitability relative to equity.
Consult our latest analysis for SITE centers
How to calculate return on equity?
Return on equity can be calculated using the formula:
Return on equity = Net income (from continuing operations) ÷ Equity
Thus, based on the above formula, the ROE for SITE centers is:
2.2% = US $ 45 million ÷ US $ 2.0 billion (based on the last twelve months to June 2021).
The “return” is the amount earned after tax over the past twelve months. This therefore means that for every $ 1 invested by its shareholder, the company generates a profit of $ 0.02.
Why is ROE important for profit growth?
So far we’ve learned that ROE is a measure of a company’s profitability. Based on the portion of its profits that the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Generally speaking, all other things being equal, companies with high return on equity and high profit retention have a higher growth rate than companies that do not share these attributes.
A side-by-side comparison of SITE center profit growth and 2.2% ROE
It is quite clear that the ROE of the SITE Centers is rather low. Even compared to the industry average ROE of 5.2%, the company’s ROE is pretty dismal. However, the moderate 13% net income growth observed by SITE centers over the past five years is certainly positive. Therefore, the growth in earnings could probably have been caused by other variables. For example, the business has a low payout ratio or is managed efficiently.
We then compared the net income growth of SITE Centers with the industry and we are delighted to see that the growth number of the company is higher than that of the industry which has a growth rate of 9.4. % during the same period.
The basis for attaching value to a business is, to a large extent, related to the growth of its profits. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. In doing so, he will have an idea if the action is heading for clear blue waters or swampy waters ahead. Is the SITC properly assessed? This intrinsic business value infographic has everything you need to know.
Are SITE centers making efficient use of its profits?
SITE Centers appears to pay out most of its income as dividends judging by its three-year median payout rate of 82%, which means the company only keeps 18% of its income. However, this is typical for REITs as they are often required by law to distribute most of their income. Despite this, the company was able to significantly increase its profits, as we saw above.
In addition, SITE Centers is determined to continue to share its profits with its shareholders, which we can deduce from its long history of paying dividends for at least ten years. Our latest analyst data shows the company’s future payout ratio is expected to drop to 43% over the next three years. Either way, the ROE is not expected to change much for the company despite the expected lower payout ratio.
Overall, we believe that SITE centers have positive attributes. While its profit growth is undoubtedly quite substantial, we believe the rate of reinvestment is quite low, which means that the number of profit growth could have been considerably higher if the company had kept a larger portion of it. of its profits. That said, studying the latest analysts’ forecast, we found that while the company has seen past earnings growth, analysts expect future earnings to decline. Are the expectations of these analysts based on general industry expectations or on company fundamentals? Click here to go to our business analyst forecasts page.
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