Pacira BioSciences (NASDAQ:PCRX) has had nearly three months as its share price has fallen 31%. However, the company’s fundamentals look pretty good, and the long-term financials are usually in line with future market price movements. Specifically, we decided to study Basera Biological Sciences ROE in this article.
Return on Equity or Return on Equity is an important factor that must be taken into consideration by the shareholders because it tells them how effectively they will reinvest their capital. In short, return on equity shows the profit each dollar generates in respect of a shareholder’s investment.
Check out our latest analysis for Pacira BioSciences
How do you calculate return on equity?
the return on equity formula he:
Return on Equity = Net profit (from continuing operations) ÷ Shareholders’ equity
So, based on the above formula, Pacira BioSciences’ ROE is:
2.7% = $21M $770M (Based on subsequent 12 months to September 2022).
The “return” is the profit over the past twelve months. Another way to think of it is that for every $1 of stock, the company was able to earn $0.03 in earnings.
What is the relationship between ROE and earnings growth?
So far, we’ve learned that return on equity is a measure of a company’s profitability. We now need to assess how much profit the company is reinvesting or “keeping” for future growth which then gives us an idea of the company’s growth potential. Assuming everything else remains unchanged, the higher the return on equity and earnings retention, the higher the company’s growth rate compared to companies that don’t necessarily bear these characteristics.
Pacira BioSciences earnings growth and 2.7% ROE
As you can see, Pacira BioSciences’ ROE looks pretty weak. Not only that, even compared to the industry average of 18%, the company’s return on equity is completely unremarkable. However, we are pleasantly surprised to see that Pacira BioSciences has grown its net income at a whopping 55% rate in the past five years. Therefore, there may be other reasons behind this growth. Such as – maintaining high profits or having effective management.
As a next step, we compared Pacira BioSciences net income growth to the industry and, gratifyingly, found that the growth experienced by the company was above the industry average of 14%.
Dividend growth is a big factor in stock valuation. It is important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them determine if the stock’s future looks promising or inauspicious. One good indicator of expected earnings growth is the price-earnings ratio, which determines the price the market is willing to pay for a stock based on its earnings expectations. So, you may like it Check if Pacira BioSciences is trading at a high P/E or a low P/Erelative to its industry.
Is Pacira BioSciences Reinvesting Its Dividend Efficiently?
Pacira BioSciences pays no dividends to its shareholders, which means the company reinvests all of its profits back into the business. That’s probably what’s driving the high earnings growth number discussed above.
Overall, we feel that Pacira BioSciences has some positive traits. Even despite the low rate of return, the company has recorded impressive earnings growth as a result of heavy reinvestment in its business. In examining current analyst estimates, we found that analysts expect the company to continue its recent growth streak. For more on the company’s latest analyst predictions, check this out Visualize analyst forecasts for the company.
What are the risks and opportunities Basera Biological Sciences?
Pacira BioSciences, Inc. Non-opioid pain management and regenerative health solutions for healthcare practitioners and their patients in the United States.
It traded 82.6% below our fair value estimate
Earnings are expected to grow by 48.51% annually
Interest payments are not covered well by earnings
Shareholders have been diluted in the past year
Profit margins (3.2%) lower than last year (12%)
Large one-time items affecting financial results
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This article written by Simply Wall St is general in nature. We provide comments based on historical data and analyst predictions 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 it does not take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by fundamental data. Note that our analysis may not include the company’s most recent price-sensitive announcements or specific materials. Wall Street simply has no position in any of the stocks mentioned.