Most readers would already know that Hartford Financial Services Group’s (NYSE:HIG) stock increased by 7.1% over the past three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. In this article, we decided to focus on Hartford Financial Services Group’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. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

See our latest analysis for Hartford Financial Services Group

How Do You Calculate Return On Equity?

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 Hartford Financial Services Group is:

19% = US$2.9b ÷ US$16b (Based on the trailing twelve months to June 2024).

The ‘return’ is the yearly profit. That means that for every $1 worth of shareholders’ equity, the company generated $0.19 in profit.

Why Is ROE Important For Earnings Growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. 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.

A Side By Side comparison of Hartford Financial Services Group’s Earnings Growth And 19% ROE

At first glance, Hartford Financial Services Group seems to have a decent ROE. Further, the company’s ROE compares quite favorably to the industry average of 13%. This certainly adds some context to Hartford Financial Services Group’s decent 8.2% net income growth seen over the past five years.

Next, on comparing Hartford Financial Services Group’s net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 10% over the last few years.

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Hartford Financial Services Group fairly valued compared to other companies? These 3 valuation measures might help you decide.

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Is Hartford Financial Services Group Making Efficient Use Of Its Profits?

Hartford Financial Services Group has a low three-year median payout ratio of 23%, meaning that the company retains the remaining 77% of its profits. This suggests that the management is reinvesting most of the profits to grow the business.

Additionally, Hartford Financial Services Group has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts’ consensus data, we found that the company’s future payout ratio is expected to drop to 17% over the next three years. Despite the lower expected payout ratio, the company’s ROE is not expected to change by much.

Conclusion

Overall, we are quite pleased with Hartford Financial Services Group’s performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. We also studied the latest analyst forecasts and found that the company’s earnings growth is expected be similar to its current growth rate. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

It goes beyond just getting from point ‘A’ to point ‘B.’ A vehicle acts as a lifeline to work, school, doctor appointments, and more. For many people living in Arizona, a vehicle is essential, but it might not be affordable.

Let ABC15 Know viewer Stephen says when his Jeep had a transmission problem, he had to take it to a shop. However, being without a car created other issues.

“I was just trying to get my vehicle back because I was trying to get back to work,” Stephen explained.

The repair was not cheap. Stephen financed $2,818 through the repair company to afford the new transmission. As part of the contract, the annual percentage rate for the loan was nearly 180%! But, without other financing options and in need of a vehicle, he signed.

“It’s ridiculous,” Stephen said, voicing his frustration. “There should be a cap for how much they can charge an interest.”

In Arizona, there is no law limiting auto loan interest rates, but there is a law capping title loan rates.

By law, title loans have limits on the monthly interest rate that can be charged depending on the price of the loan.

Let ABC15 Know viewer Jaylyn shared their title loan document. They financed $2,500 and their APR was a whopping 153%. While a high number, it’s within the legal monthly percentage limit. At the 153% rate, Jaylyn would pay more than $12,000 to clear the loan.

Companies fronting the loans do take on risk, but consumers like Stephen question if such large percentage rates add extra hardship on consumers without many financial options.

“I ended up going through and selling things that I had so I could pay off this one particular loan,” Stephen explained.

The Arizona Department of Insurance and Financial Institutions has the following tips for consumers:

• Make sure you understand how title loans work and how the interest is calculated
• Ask questions if anything is unclear
• Compare interest rates between lenders
• Never sign a contract before reading it
• If you are not able to make a payment when it is due, contact the lender to make payment arrangements
• If you have a problem with a Title Lender, file a complaint with DIFI

Iowa State University has named Sean Reeder as senior vice president of operations and finance after completing a separation agreement with former vice president Shawn Norman.

Reeder will start in the new role Sept. 3, pending approval from the Iowa Board of Regents, according to a news release.

He comes to the university after serving as vice chancellor for finance and administration at the University of Missouri, Kansas City for more than two years. He has also held positions at Eastern Illinois University, the University of Illinois system and Michigan State University.