[ad_1]
Return on Equity (RoE) is one of the most important profitability ratios that is arrived at by dividing the net income by shareholders’ equity. It measures the firm’s ability to turn equity investments into profits and therefore the higher the ratio, the better it is.
On that note, I am listing down 2 mid-cap counters that have clocked the highest average RoE over the last 5 financial years.
Colgate-Palmolive (NYSE:) (India) Limited
Colgate-Palmolive (India) Ltd. (NS:) is the biggest player in the country in the oral care product segment, having a market capitalization of INR 53,771 crore. The company reported a 10.7% YoY jump in Q1 FY24 revenue to INR 1,338.64 crore and the net income jumped 30.5% YoY to INR 273.68 crore. FIIs have continuously increased their stake in the past 5 consecutive quarters to 21.8% by the end of the June 2023 quarter.
Over the past 5 fiscal years, it has delivered an average RoE of a mammoth 63.19, making it the best performer on this front among all 250 midcaps. The stock has risen sharply since February 2023, therefore investors might be better off if they wait for the price to cool off before going long on this stock.
Sona BLW Precision Forgings Limited
Sona BLW Precision Forgings Ltd (NS:) is an automotive parts and components manufacturer, with a market capitalization of INR 32,578 crore. The stock delivered high returns soon after its listing as it more than doubled in less than 6 months but shortly topped out at around INR 840 and came crashing down and formed a base around INR 400.
On an annual basis, the company has been growing its net income at a healthy 5-year CAGR of 38.5% and its Q1 FY24 profit of INR 112.02 crore was a high 47.7% YoY jump. Over the last 5 years, it has clocked an RoE of 60.65 (average) which is the second-best performance in the midcap space. This is one of the most favorite counters of FIIs as they have more than tripled their stake in a span of 1 year, from 8.8% in June 2022 to 31.68% in June 2023.
Read More: Small-Cap: A 6% Gainer That’s Ready to ‘Explode’!
[ad_2]
Source link
