Freelancer (ASX:FLN) has had a great run on the share market with its stock up by a significant 26% over the last three months. Given that stock prices are usually aligned with a company’s financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. In this article, we decided to focus on Freelancer’s ROE.
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Freelancer is:
7.7% = AU$2.1m ÷ AU$28m (Based on the trailing twelve months to June 2025).
The ‘return’ is the yearly profit. That means that for every A$1 worth of shareholders’ equity, the company generated A$0.08 in profit.
See our latest analysis for Freelancer
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.
On the face of it, Freelancer’s ROE is not much to talk about. Next, when compared to the average industry ROE of 17%, the company’s ROE leaves us feeling even less enthusiastic. Despite this, surprisingly, Freelancer saw an exceptional 27% net income growth over the past five years. So, there might be other aspects that are positively influencing the company’s earnings growth. For example, it is possible that the company’s management has made some good strategic decisions, or that the company has a low payout ratio.
Next, on comparing with the industry net income growth, we found that Freelancer’s growth is quite high when compared to the industry average growth of 6.9% in the same period, which is great to see.
Source: Freelancer Limited’s (ASX:FLN) Stock On An Uptrend: Could Fundamentals Be Driving The
