Livent’s (NYSE:LTHM) stock is upward with a substantial 16% within the last 3 months. However, the organization’s key financial indicators seem to be varied across the board which makes us wonder whether the business’s present share price momentum could be maintained. Especially, we chose to examine Livent’s ROE in this article.ROE or return on equity is a helpful tool to estimate how efficiently a business may create returns on the investment it received from its own shareholders. Put a different way, it shows that the organization’s success at turning shareholder investments to profits. View our most recent evaluation for Livent How Is ROE Calculated?Return on equity can be calculated using the formula:Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ EquitySo, depending on the above formulation, the ROE for Livent is:5.8% = US$31m ÷ US$541m (According to the trailing twelve months to March 2020).The ‘yield’ is your gain during the previous twelve months. A different way to consider this is that for each $1 worth of equity, the business managed to make $0.06 at profit.What Has ROE Got To Do With Earnings Growth?So much, we have discovered that ROE is a measure of a business’s profitability. Depending on how much of its gains the provider chooses to market or “keep”, we’re then able to appraise a organization’s future ability to create profits. Assuming everything else stays unchanged, the more elaborate the ROE and gain retention, the greater the growth rate of a business in comparison to businesses which don’t necessarily endure those characteristics.A Side By Side contrast of Livent’s Earnings Growth And 5.8% ROEOn the surface of itLivent’s ROE isn’t much to discuss. Next, compared to the typical business ROE of 12%, the organization’s ROE leaves us feeling much less enthusiastic. Because of this, Livent reported an extremely low revenue increase of 4.1% over the previous five years.As another step, we contrasted Livent’s net revenue increase with the business and have been disappointed to realize that the organization’s expansion is lower compared to the sector average expansion of 11% at the very same period.Earnings expansion is a massive element in stock valuation. What investors will need to ascertain next is whether the anticipated earnings growth, or the lack of it, is built into the talk price. By doing this, they are going to get an idea if the stock is led into clear blue waters or when swampy waters anticipate. Is Livent rather valued in comparison to other businesses? All these three valuation steps can help you decide.Story continuesIs Livent With Its Retained Earnings Effectively?Livent does not cover any dividend, meaning it is keeping all its earnings. However, this does not explain the reduced earnings growth the firm has seen. So there might be some additional explanation in that respect. As an example, the organization’s company may be more deteriorating.SummaryOverall, we’ve mixed feelings about Livent. Though it seems to be keeping nearly all of its gains, given the minimal ROE, investors may be profiting from all of that reinvestment whatsoever. The reduced earnings growth indicates our concept right. That said, the most recent industry analyst predictions show that the organization’s earnings are expected to quicken. To find out more about the most recent analysts forecasts for your company, have a look at this visualization of analyst predictions for the company.This post by Just Wall St is general in character. It doesn’t constitute a recommendation to purchase or sell any stock, and doesn’t take account of your goals, or your own fiscal circumstance. We plan to deliver you long-term concentrated analysis driven by basic data. Notice that our investigation may not variable in the newest price-sensitive business announcements or qualitative substance. Just Wall St has no place in any stocks mentioned.Have comments on this report? Concerned about the articles? Get in contact with us straight. Alternately, email firstname.lastname@example.org.