Central Holding Group's (HKG:1735) stock is up by a considerable 14% 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. Specifically, we decided to study Central Holding Group's ROE in this article.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
See our latest analysis for Central Holding Group
How Do You Calculate Return On Equity?
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 Central Holding Group is:
36% = HK$84m ÷ HK$231m (Based on the trailing twelve months to June 2022).
The 'return' is the amount earned after tax over the last twelve months. So, this means that for every HK$1 of its shareholder's investments, the company generates a profit of HK$0.36.
What Has ROE Got To Do With Earnings Growth?
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.
Central Holding Group's Earnings Growth And 36% ROE
Firstly, we acknowledge that Central Holding Group has a significantly high ROE. Secondly, even when compared to the industry average of 6.8% the company's ROE is quite impressive. So, the substantial 34% net income growth seen by Central Holding Group over the past five years isn't overly surprising.
Given that the industry shrunk its earnings at a rate of 1.6% in the same period, the net income growth of the company is quite impressive.
SEHK:1735 Past Earnings Growth September 19th 2022
Earnings growth is a huge factor in stock valuation. 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. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Central Holding Group is trading on a high P/E or a low P/E, relative to its industry.
Is Central Holding Group Using Its Retained Earnings Effectively?
Central Holding Group doesn't pay any dividend 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.
Conclusion
In total, we are pretty happy with Central Holding Group's performance. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Let's not forget, business risk is also one of the factors that affects the price of the stock. So this is also an important area that investors need to pay attention to before making a decision on any business. You can see the 1 risk we have identified for Central Holding Group by visiting our risks dashboard for free on our platform here.
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.
中央控股集团(HKG:1735)的股票在过去三个月中大幅上涨了14%。考虑到市场从长期来看会奖励强劲的金融类股,我们想知道,在这种情况下,情况是否如此。具体地说,我们决定在本文中研究中央控股集团的净资产收益率。
股本回报率(ROE)是用来评估公司管理层利用公司资本效率的关键指标。简而言之,它衡量的是一家公司相对于股东权益的盈利能力。
查看我们对中央控股集团的最新分析
你如何计算股本回报率?
可使用以下公式计算净资产收益率:
股本回报率=(持续经营的)净利润?股东权益
因此,根据上述公式,中央控股集团的净资产收益率为:
36%=8400万港元×2.31亿港元(根据截至2022年6月的过去12个月计算)。
“报税表”是过去12个月的税后收入。因此,这意味着股东每投资1港元,公司就会产生0.36港元的利润。
净资产收益率与盈利增长有什么关系?
到目前为止,我们已经了解到净资产收益率衡量的是一家公司创造利润的效率。我们现在需要评估公司将多少利润再投资或“保留”用于未来的增长,这就让我们对公司的增长潜力有了一个了解。假设其他条件不变,净资产收益率和利润保留率越高,与不一定具有这些特征的公司相比,公司的增长率就越高。
中央控股集团盈利增长和36%的净资产收益率
首先,我们承认中央控股集团拥有显著较高的净资产收益率。其次,即使与6.8%的行业平均水平相比,该公司的净资产收益率也相当令人印象深刻。因此,中央控股集团过去五年34%的净利润大幅增长并不太令人意外。
考虑到该行业同期盈利缩水1.6%的速度,该公司的净收入增长相当可观。
联交所:1735过去盈利增长2022年9月19日
盈利增长是股票估值的一个重要因素。对于投资者来说,重要的是知道市场是否已经消化了公司预期的收益增长(或下降)。这样做将有助于他们确定该股的未来看起来是光明的还是不祥的。衡量预期收益增长的一个很好的指标是市盈率,它根据一只股票的盈利前景决定市场愿意为其支付的价格。因此,你可能想要检查一下中央控股集团相对于其行业的市盈率是高还是低。
中央控股集团是否有效地利用了其留存收益?
中央控股集团不向股东支付任何股息,这意味着该公司一直在将所有利润再投资于该业务。这很可能是推动上述高收益增长数字的原因。
结论
总体而言,我们对中央控股集团的表现相当满意。特别是,很高兴看到该公司在业务上投入了大量资金,并获得了高回报率,这导致了其收益的可观增长。如果该公司继续以目前的方式增长收益,考虑到每股收益对长期股价的影响,这可能会对其股价产生积极影响。我们不要忘记,商业风险也是影响股票价格的因素之一。因此,这也是投资者在对任何业务做出决定之前需要关注的一个重要领域。您可以通过访问我们的风险控制面板在我们的平台上是免费的。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。