Most readers would already be aware that Osaka Organic Chemical Industry’s (TSE:4187) stock increased significantly by 34% over the past three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company’s key financial indicators today to determine if they have any role to play in the recent price movement. Particularly, we will be paying attention to Osaka Organic Chemical Industry’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.
This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.
How Do You 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 Osaka Organic Chemical Industry is:
10% = JP¥4.8b ÷ JP¥46b (Based on the trailing twelve months to August 2025).
The ‘return’ is the amount earned after tax over the last twelve months. Another way to think of that is that for every ¥1 worth of equity, the company was able to earn ¥0.10 in profit.
Check out our latest analysis for Osaka Organic Chemical Industry
What Has ROE Got To Do With Earnings Growth?
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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. 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.
Osaka Organic Chemical Industry’s Earnings Growth And 10% ROE
To start with, Osaka Organic Chemical Industry’s ROE looks acceptable. On comparing with the average industry ROE of 6.9% the company’s ROE looks pretty remarkable. However, we are curious as to how the high returns still resulted in flat growth for Osaka Organic Chemical Industry in the past five years. Therefore, there could be some other aspects that could potentially be preventing the company from growing. These include low earnings retention or poor allocation of capital.
As a next step, we compared Osaka Organic Chemical Industry’s net income growth with the industry and were disappointed to see that the company’s growth is lower than the industry average growth of 7.5% in the same period.
TSE:4187 Past Earnings Growth October 24th 2025
Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is Osaka Organic Chemical Industry fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Osaka Organic Chemical Industry Making Efficient Use Of Its Profits?
In spite of a normal three-year median payout ratio of 31% (or a retention ratio of 69%), Osaka Organic Chemical Industry hasn’t seen much growth in its earnings. Therefore, there might be some other reasons to explain the lack in that respect. For example, the business could be in decline.
Moreover, Osaka Organic Chemical Industry 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.
Conclusion
On the whole, we do feel that Osaka Organic Chemical Industry has some positive attributes. However, given the high ROE and high profit retention, we would expect the company to be delivering strong earnings growth, but that isn’t the case here. This suggests that there might be some external threat to the business, that’s hampering its growth. 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.
New: AI Stock Screener & Alerts
Our new AI Stock Screener scans the market every day to uncover opportunities.
• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies
Or build your own from over 50 metrics.
Explore Now for Free
Have 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.
AloJapan.com