Summit Materials (NYSE:SUM), a company listed on the New York Stock Exchange, has experienced an 11% decrease in its stock price over the past month. Despite this downturn, the firm's financial performance remains solid over the long term, demonstrating resilience in its return on equity (ROE).
ROE is a measure of how effectively a company uses shareholder investments to generate profits. For Summit Materials, this measure stands at 8.3%, based on a net profit of $171 million and shareholders' equity of $2.1 billion. These figures are derived from data for the trailing 12 months up to July 2023. The ROE indicates that Summit Materials generated $0.08 in profit for every $1 of shareholders' equity.
Although Summit Materials' ROE of 8.3% might not initially appear impressive when compared to the industry average of 13%, it is important to note that the company has achieved substantial growth in net income over the past five years, with an increase of 34%. This growth suggests that factors other than ROE could be influencing the company's performance and growth potential.
ROE is also a vital tool for assessing a company's potential for earnings growth by evaluating how much of its profit a company reinvests or retains for future growth. In theory, a higher ROE and profit retention rate could point towards a higher growth rate for the company, assuming all other factors remain constant.
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