Has LPI Capital Bhd (KLSE:LPI) Stock’s Recent Performance Got Anything to Do With Its Financial Health?

LPI Capital Bhd’s (KLSE:LPI) stock is up by 6.2% over the past three months. Given that stock prices are usually aligned with a company’s financial performance in the long-term, we decided to investigate if the company’s decent financials had a hand to play in the recent price move. Particularly, we will be paying attention to LPI Capital Bhd’s ROE today.

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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The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for LPI Capital Bhd is:

16% = RM370m ÷ RM2.3b (Based on the trailing twelve months to September 2025).

The ‘return’ is the yearly profit. That means that for every MYR1 worth of shareholders’ equity, the company generated MYR0.16 in profit.

Check out our latest analysis for LPI Capital Bhd

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. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

At first glance, LPI Capital Bhd seems to have a decent ROE. Even when compared to the industry average of 14% the company’s ROE looks quite decent. Despite the moderate return on equity, LPI Capital Bhd has posted a net income growth of 2.5% over the past five years. We reckon that a low growth, when returns are moderate could be the result of certain circumstances like low earnings retention or poor allocation of capital.

We then compared LPI Capital Bhd’s net income growth with the industry and found that the company’s growth figure is lower than the average industry growth rate of 12% in the same 5-year period, which is a bit concerning.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is LPI worth today? The intrinsic value infographic in our free research report helps visualize whether LPI is currently mispriced by the market.

With a high three-year median payout ratio of 85% (or a retention ratio of 15%), most of LPI Capital Bhd’s profits are being paid to shareholders. This definitely contributes to the low earnings growth seen by the company.

Moreover, LPI Capital Bhd has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Upon studying the latest analysts’ consensus data, we found that the company is expected to keep paying out approximately 84% of its profits over the next three years. Regardless, the future ROE for LPI Capital Bhd is predicted to rise to 20% despite there being not much change expected in its payout ratio.

In total, it does look like LPI Capital Bhd has some positive aspects to its business. However, while the company does have a high ROE, its earnings growth number is quite disappointing. This can be blamed on the fact that it reinvests only a small portion of its profits and pays out the rest as dividends. With that said, the latest industry analyst forecasts reveal that the company’s earnings are expected to accelerate. To know more about the company’s future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.