It’s hard to get excited about Southern Cross Media Group’s ( ASX:SXL ) recent performance, when its stock has fallen 18% over the past three months. To judge whether this trend can continue, we decided to look at its weak fundamentals as they shape long-term market trends. Specifically, we decided to study the ROE of Southern Cross Media Group in this article.
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.
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ROE can be calculated using the formula:
Return on equity = net profit (from continuing operations) ÷ stockholders’ equity
So, based on the formula above, the ROE for Southern Cross Media Group is:
3.0% = AU$6.4m ÷ AU$212m (based on twelve months to June 2025).
‘Return’ means the amount earned by paying tax in the last twelve months. This means that for every A$1 worth of shareholders’ equity, the company generated A$0.03 in profit.
Check out our latest analysis for Southern Cross Media Group
So far, we have seen that ROE measures how efficiently a company is generating its profits. Based on how much of its profits a company chooses to reinvest or “retain”, we are able to assess a company’s ability to generate profits in the future. Assuming all else remains constant, the higher the ROE and profit retention, the higher the company’s growth rate compared to companies without these characteristics.
As you can see, Southern Cross Media Group’s ROE looks very weak. Even compared to the average industry ROE of 4.7%, the company’s ROE is quite disappointing. Hence, it may not be wrong to say that the five-year net income decline of 48% witnessed by Southern Cross Media Group was probably due to its low ROE. We believe there may be other factors that are negatively impacting the company’s earnings prospects. Like – low income retention or low allocation of capital.
So, as a next step, we compared Southern Cross Media Group’s performance against the industry and were disappointed to find that the industry has grown its earnings at a rate of 38% over the past few years, while the company has been reducing its earnings.
ASX:SXL Past Earnings Growth 26 Jan 2026
Earnings growth is an important metric to consider when evaluating a stock. Expected earnings growth, or lack thereof, is already built into the share price, so investors need to determine another. By doing this, they will have an idea whether the stock is going into clear blue water or waiting for swamp water. If you’re wondering about Southern Cross Media Group’s valuation, check out this gauge of its price-to-earnings ratio compared to its industry.
With an LTM (or trailing twelve month) payout ratio as high as 150%, Southern Cross Media Group’s declining earnings are not surprising given that the company is paying dividends that are beyond its means. Paying dividends beyond their means is usually not viable in the long run. Visit our risk dashboard for free to learn about the 2 risks we identified for Southern Cross Media Group.
In addition, Southern Cross Media Group has paid dividends for at least ten years, which means that the company’s management is committed to paying dividends even if there is no earnings growth. Existing analyst estimates expect the company’s future payout ratio to fall to 36% over the next three years. As a result, the expected decline in Southern Cross Media Group’s payout ratio implies an expected increase in the company’s future ROE of up to 16% over the same period.
Overall, we should think hard before deciding on any investment action regarding Southern Cross Media Group. A low ROE, combined with the fact that a company is paying out almost all of its profits as dividends, results in a lack or absence of growth in its earnings. So, according to the latest industry analyst forecasts, analysts expect to see a major improvement in the company’s earnings growth rate. To learn more about the latest analyst forecasts for the company, check out this view of analyst forecasts for the company.
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This article by Simply Wall St. is general in nature. We only provide commentary using an unbiased methodology based on historical data and analyst forecasts and our articles are not intended to be financial advice. It does not recommend buying or selling any stock, and does not take into account 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 content. Simply Wall St. has no position in any of the stocks mentioned.
