ACM Research's 20% CAGR: A Closer Look at ROE, Earnings Growth, and Reinvestment
Monday, Dec 23, 2024 9:59 am ET
4min read ACM Research (NASDAQ:ACMR) shareholders have enjoyed a remarkable 20% compound annual growth rate (CAGR) over the last five years. This impressive performance can be attributed to several key factors, including the company's return on equity (ROE), earnings growth, and strategic reinvestment of profits. Let's delve into these aspects to understand the drivers behind ACM Research's exceptional growth.
ACM Research's ROE has played a significant role in its 20% CAGR. With an ROE of 11% (based on the trailing twelve months to September 2024), the company has effectively generated $0.11 in profit for every $1 of shareholder investments. This high ROE indicates ACM Research's ability to convert shareholder investments into profits, contributing to its remarkable growth.
The company's strong earnings growth is another crucial factor behind its impressive CAGR. ACM Research's net income growth of 37% over the past five years outpaces the industry average of 21%. This robust earnings performance is supported by the company's reinvestment of all profits back into the business. By not paying any regular dividends, ACM Research has been able to maintain a high rate of return on investments, driving its shareholder value.
Analyst recommendations and the Zacks Rank have also contributed to ACM Research's stock performance and 20% CAGR. With an average brokerage recommendation (ABR) of 1.25, approximating between Strong Buy and Buy, and a Zacks Rank of 3 (Hold), analysts have generally been positive about ACM Research. The consensus estimate for the current year has remained unchanged at $1.63, indicating analysts' steady views on the company's earnings prospects.
In conclusion, ACM Research's 20% CAGR over the last five years can be attributed to its strong return on equity, robust earnings growth, and efficient reinvestment of profits. While analysts' recommendations have also played a role in the company's impressive performance, the core drivers behind ACM Research's growth lie in its ability to generate profits and reinvest them effectively. As the company continues to focus on these key aspects, investors can expect ACM Research to maintain its strong performance in the years to come.
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