Are Robust Financials Driving The Recent Rally In Decibel Cannabis Company Inc.’s (CVE:DB)
September 28, 2025
Most readers would already be aware that Decibel Cannabis’ (CVE:DB) stock increased significantly by 86% 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. Particularly, we will be paying attention to Decibel Cannabis’ ROE today.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.
ROE can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Decibel Cannabis is:
20% = CA$13m ÷ CA$65m (Based on the trailing twelve months to June 2025).
The ‘return’ is the yearly profit. That means that for every CA$1 worth of shareholders’ equity, the company generated CA$0.20 in profit.
See our latest analysis for Decibel Cannabis
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. 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 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 begin with, Decibel Cannabis seems to have a respectable ROE. Especially when compared to the industry average of 6.0% the company’s ROE looks pretty impressive. This probably laid the ground for Decibel Cannabis’ significant 69% net income growth seen over the past five years. However, there could also be other causes behind this growth. Such as – high earnings retention or an efficient management in place.
We then compared Decibel Cannabis’ net income growth with the industry and we’re pleased to see that the company’s growth figure is higher when compared with the industry which has a growth rate of 27% in the same 5-year period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). Doing so will help them establish if the stock’s future looks promising or ominous. Is Decibel Cannabis fairly valued compared to other companies? These 3 valuation measures might help you decide.
Decibel Cannabis doesn’t pay any regular dividends to its shareholders, meaning that the company has been reinvesting all of its profits into the business. This is likely what’s driving the high earnings growth number discussed above.
Overall, we are quite pleased with Decibel Cannabis’ 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. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. 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.
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