Return on Equity (ROE) is a measure of a company’s financial performance calculated by dividing its net income by shareholders’ equity. It is a good measure of a company’s profitability and how efficient its management is in generating profits. The higher a company’s ROE is, the more efficient its management is at generating income and growth from its equity financing.
Here are a few penny stocks with a high return on equity:
Standard Industries Ltd
The company is in the business of property division and trading in textiles and chemicals. It is a penny stock with a market capitalization of ₹173 crores and a share price of ₹ 27.80 apiece.
It has a massive return on equity of 375.92% and an ideal debt to equity ratio of 0.18. The company has a very high dividend yield of 9.28%. One of the main reasons for its high return on equity is a massive jump in its profit from ₹ 3.11 crores in the financial year (FY) 2020-21 to ₹ 184.66 crores in FY 2021-22. Its net sales increased from ₹ 11.9 crores to ₹ 438.96 crores during the same period.
Its shares gave multibagger returns of 130.70% in the past year as its share price increased from ₹ 12.05 apiece to ₹ 27.80 apiece. Therefore, if an investor would have invested ₹ 1 lakh in the company’s shares a year ago, the value of their holdings would have been ₹ 2.30 lakhs today!
Radhe Developers Ltd
The company is engaged in the business of real estate development. It is a penny stock with a market capitalization of ₹ 378 crores and a share price of ₹ 7.10 apiece.
It has a high return on equity of 60.33% and an ideal debt to equity ratio of 0.30. One of the main reasons for its high return on equity is a jump in its profit. It had reported a loss of ₹ 2.91 crores in FY 2020-21, however, its profit skyrocketed to ₹ 25.23 crores in FY 2021-22. Its net sales increased from ₹ 0.89 crores to ₹ 43.6 crores during the same period.
However, the company’s share price has declined by 60.60% in the past year as it reported unimpressive quarterly numbers as compared to the previous year.
Shyam Century Ferrous Ltd
The company is engaged in manufacturing Ferro Alloys like Ferro Silicon mainly in North-Eastern India. It is a penny stock with a market capitalization of ₹ 371 crores and a share price of ₹ 17.65 apiece.
It has a high return on equity of 38.83% and an ideal debt to equity ratio of 0.04. One of the main reasons for its high return on equity is a jump in its profit from ₹ 36.1 crores in the FY 2020-21 to ₹ 67.61 crores in FY 2021-22. Its net sales increased from ₹ 6,297.07 crores to ₹ 10,393.96 crores during the same period.
However, the company’s share price has declined by 7.33% in the past year as it reported unimpressive numbers during the nine months ended December 31, 2022.
Please note that penny stocks are highly risky investments. Though they have the potential to give high returns, they may wipe the entire capital that is invested in them. Please consult your financial advisor before investing in them.
Written by Simran Bafna
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
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