Kronologi Asia Berhad's (KLSE:KRONO) Stock is Soaring But Financials Seem Inconsistent: Will The Uptrend Continue?

Kronologi Asia Berhad's (KLSE:KRONO) stock is up by a considerable 18% over the past month.   But the company's key financial indicators appear to be differing across the board and that makes us question whether or not the company's current share price momentum can be maintained.      Particularly, we will be paying attention to Kronologi Asia Berhad's  ROE today.    Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested.  Simply put, it is used to assess the profitability of a company in relation to its equity capital.  Check out our latest analysis for Kronologi Asia Berhad  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 Kronologi Asia Berhad is:5.5% = RM22m ÷ RM398m (Based on the trailing twelve months to April 2022). The 'return' is the amount earned after tax over the last twelve months.  Another way to think of that is that for every MYR1 worth of equity, the company was able to earn MYR0.05 in profit.   What Is The Relationship Between ROE And Earnings Growth?  Thus far, we have learned that ROE measures how efficiently a company is generating its profits.  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.  Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.  Kronologi Asia Berhad's Earnings Growth And 5.5% ROE  It is hard to argue that Kronologi Asia Berhad's ROE is much good in and of itself.   Even compared to the average industry ROE of 9.8%, the company's ROE is quite dismal.   Accordingly, Kronologi Asia Berhad's low net income growth of 3.8% over the past five years can possibly be explained by the low ROE amongst other factors.     We then compared Kronologi Asia Berhad's net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 6.6% in the same period, which is a bit concerning.   KLSE:KRONO Past Earnings Growth August 1st 2022 Earnings growth is a huge factor in stock valuation.  The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in.   This then helps them determine if the stock is placed for a bright or bleak future.    One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Kronologi Asia Berhad is trading on a high P/E or a low P/E, relative to its industry.    Is Kronologi Asia Berhad Using Its Retained Earnings Effectively?    While the company did pay out a portion of its dividend in the past, it currently doesn't pay a dividend. We infer that the company has been reinvesting all of its profits to grow its business.      Summary    Overall, we have mixed feelings about Kronologi Asia Berhad.      Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct.       With that said, the latest industry analyst forecasts reveal that the company's earnings are expected to accelerate.     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. Valuation is complex, but we're helping make it simple.Find out whether Kronologi Asia Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free AnalysisHave 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.


One Kronologi Asia Berhad (KLSE:KRONO) Analyst Just Made A Major Cut To Next Year's Estimates

Market forces rained on the parade of Kronologi Asia Berhad (KLSE:KRONO) shareholders today, when the covering analyst downgraded their forecasts for this year.   Both revenue and earnings per share (EPS) estimates were cut sharply as the analyst factored in the latest outlook for the business, concluding that they were too optimistic previously.    Following the latest downgrade, the current consensus, from the solo analyst covering Kronologi Asia Berhad, is for revenues of RM255m in 2023, which would reflect a not inconsiderable 14% reduction in Kronologi Asia Berhad's sales over the past 12 months.       Statutory earnings per share are supposed to fall 17% to RM0.023 in the same period.        Prior to this update, the analyst had been forecasting revenues of RM349m and earnings per share (EPS) of RM3.00 in 2023.        Indeed, we can see that the analyst is a lot more bearish about Kronologi Asia Berhad's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.     View our latest analysis for Kronologi Asia Berhad KLSE:KRONO Earnings and Revenue Growth September 23rd 2022 Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates.     We would highlight that sales are expected to reverse, with a forecast 14% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 18% over the last five years.    Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 21% per year.  It's pretty clear that Kronologi Asia Berhad's revenues are expected to perform substantially worse than the wider industry.     The Bottom Line  The most important thing to take away is that the analyst cut their earnings per share estimates, expecting a clear decline in business conditions.        Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market.        We wouldn't be surprised to find shareholders feeling a bit shell-shocked, after these downgrades. It looks like the analyst has become a lot more bearish on Kronologi Asia Berhad, and their negativity could be grounds for caution.    Even so, the longer term trajectory of the business is much more important for the value creation of shareholders.   We have analyst estimates for Kronologi Asia Berhad going out as far as 2024, and you can see them free on our platform here.  Of course, seeing company management  invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying. Valuation is complex, but we're helping make it simple.Find out whether Kronologi Asia Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free AnalysisHave 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.


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