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This definitely contributes to the high earnings growth number that we discussed above. PayPal Holdings doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. Is PayPal Holdings Using Its Retained Earnings Effectively? Is PYPL fairly valued? This infographic on the company's intrinsic value has everything you need to know. Doing so will help them establish if the stock's future looks promising or ominous. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). NasdaqGS:PYPL Past Earnings Growth October 18th 2021Įarnings growth is an important metric to consider when valuing a stock. We then compared PayPal Holdings' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 15% in the same period. As a result, PayPal Holdings' exceptional 26% net income growth seen over the past five years, doesn't come as a surprise. Secondly, even when compared to the industry average of 17% the company's ROE is quite impressive. PayPal Holdings' Earnings Growth And 23% ROEįirst thing first, we like that PayPal Holdings has an impressive ROE. 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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. So far, we've learned that ROE is a measure of a company's profitability.
What Has ROE Got To Do With Earnings Growth?
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