With its stock down 17% over the past three months, it is easy to disregard Hawkins (NASDAQ:HWKN). However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. Specifically, we decided to study Hawkins’ ROE in this article.
Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Hawkins is:
16% = US$83m ÷ US$507m (Based on the trailing twelve months to September 2025).
The ‘return’ is the yearly profit. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.16 in profit.
See our latest analysis for Hawkins
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. 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.
To start with, Hawkins’ ROE looks acceptable. On comparing with the average industry ROE of 9.6% the company’s ROE looks pretty remarkable. This certainly adds some context to Hawkins’ decent 17% net income growth seen over the past five years.
Next, on comparing with the industry net income growth, we found that Hawkins’ growth is quite high when compared to the industry average growth of 4.9% in the same period, which is great to see.
Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock’s future looks promising or ominous. Is Hawkins fairly valued compared to other companies? These 3 valuation measures might help you decide.
Hawkins’ three-year median payout ratio to shareholders is 18% (implying that it retains 82% of its income), which is on the lower side, so it seems like the management is reinvesting profits heavily to grow its business.
Besides, Hawkins has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders.
In total, we are pretty happy with Hawkins’ performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company’s earnings growth is expected to slow down. Are these analysts expectations based on the broad expectations for the industry, or on the company’s fundamentals? Click here to be taken to our analyst’s forecasts page for the company.
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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.