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Münchener Rückversicherungs-Gesellschaft in München (ETR:MUV2) has had a great run on the share market with its stock up by a significant 19% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on Münchener Rückversicherungs-Gesellschaft in München's ROE.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. 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?
Return on equity can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Münchener Rückversicherungs-Gesellschaft in München is:
17% = €5.7b ÷ €33b (Based on the trailing twelve months to December 2024).
The 'return' refers to a company's earnings over the last year. That means that for every €1 worth of shareholders' equity, the company generated €0.17 in profit.
Check out our latest analysis for Münchener Rückversicherungs-Gesellschaft in München
Why Is ROE Important For Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.
A Side By Side comparison of Münchener Rückversicherungs-Gesellschaft in München's Earnings Growth And 17% ROE
At first glance, Münchener Rückversicherungs-Gesellschaft in München seems to have a decent ROE. Even when compared to the industry average of 17% the company's ROE looks quite decent. Consequently, this likely laid the ground for the impressive net income growth of 25% seen over the past five years by Münchener Rückversicherungs-Gesellschaft in München. However, there could also be other drivers behind this growth. Such as - high earnings retention or an efficient management in place.
Next, on comparing with the industry net income growth, we found that Münchener Rückversicherungs-Gesellschaft in München's growth is quite high when compared to the industry average growth of 10% in the same period, which is great to see.
