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Read This Before Judging The GEO Group, Inc.'s (NYSE:GEO) ROE
Read This Before Judging The GEO Group, Inc.'s (NYSE:GEO) ROE
While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. To keep the lesson grounded in practicality, we'll use ROE to better understand The GEO Group, Inc. (NYSE:GEO).
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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
See our latest analysis for GEO Group
How To Calculate Return On Equity?
Return on equity 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 GEO Group is:
7.2% = US$77m ÷ US$1.1b (Based on the trailing twelve months to June 2022).
The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.07 in profit.
Does GEO Group Have A Good Return On Equity?
By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. As shown in the graphic below, GEO Group has a lower ROE than the average (13%) in the Commercial Services industry classification.
NYSE:GEO Return on Equity September 24th 2022Unfortunately, that's sub-optimal. That being said, a low ROE is not always a bad thing, especially if the company has low leverage as this still leaves room for improvement if the company were to take on more debt. A company with high debt levels and low ROE is a combination we like to avoid given the risk involved. Our risks dashboard should have the 2 risks we have identified for GEO Group.
How Does Debt Impact Return On Equity?
Virtually all companies need money to invest in the business, to grow profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.
GEO Group's Debt And Its 7.2% ROE
GEO Group does use a high amount of debt to increase returns. It has a debt to equity ratio of 2.68. With a fairly low ROE, and significant use of debt, it's hard to get excited about this business at the moment. Investors should think carefully about how a company might perform if it was unable to borrow so easily, because credit markets do change over time.
Summary
Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE.
But when a business is high quality, the market often bids it up to a price that reflects this. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. So you might want to take a peek at this data-rich interactive graph of forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
虽然一些投资者已经非常精通财务指标(帽子提示),但本文面向的是那些想要了解股本回报率(ROE)及其重要性的人。为了使课程立足于实践,我们将使用净资产收益率来更好地了解GEO集团(纽约证券交易所代码:GEO)。
股本回报率或净资产收益率是股东要考虑的一个重要因素,因为它告诉他们他们的资本再投资的效率。换句话说,这是一个衡量公司股东提供的资本回报率的盈利比率。
查看我们对GEO集团的最新分析
如何计算股本回报率?
股本回报率可使用以下公式计算:
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,GEO集团的净资产收益率为:
7.2%=7700万美元×11亿美元(基于截至2022年6月的12个月)。
“回报”指的是一家公司过去一年的收益。一种将其概念化的方法是,公司每拥有1美元的股东资本,就能获得0.07美元的利润。
GEO集团的股本回报率高吗?
通过将一家公司的净资产收益率(ROE)与其行业平均水平进行比较,我们可以快速衡量它有多好。重要的是,这远远不是一个完美的衡量标准,因为在同一行业分类中,公司的差异很大。如下图所示,GEO集团的净资产收益率低于商业服务行业分类的平均水平(13%)。
纽约证券交易所:Geo股本回报率2022年9月24日不幸的是,这并不是最优的。话虽如此,低ROE并不总是一件坏事,特别是如果公司的杠杆率较低,因为如果公司承担更多债务,这仍有改进的空间。考虑到涉及的风险,高债务水平和低ROE的公司是我们希望避免的组合。我们的风险仪表板应该有我们为GEO集团确定的两个风险。
债务对股本回报率有何影响?
几乎所有的公司都需要资金来投资于业务,以增加利润。投资的现金可以来自上一年的利润(留存收益)、发行新股或借款。在第一种和第二种情况下,净资产收益率将反映对企业投资的现金使用情况。在后一种情况下,用于增长的债务将提高回报,但不会影响总股本。因此,债务的使用可以提高净资产收益率,尽管打个比方说,在暴风雨天气的情况下会有额外的风险。
Geo集团的债务及其7.2%的净资产收益率
Geo Group确实使用了大量债务来增加回报。它的债务与股本比率为2.68。由于净资产收益率(ROE)相当低,而且大量使用债务,目前很难对这项业务感到兴奋。投资者应该仔细考虑,如果一家公司不能如此轻松地借款,它可能会表现如何,因为信贷市场确实会随着时间的推移而变化。
摘要
股本回报率在比较不同企业的质量时很有用。在我们的账目中,最高质量的公司拥有高股本回报率,尽管债务水平较低。如果两家公司的债务权益比大致相同,而其中一家公司的净资产收益率更高,我通常会更喜欢净资产收益率更高的那家公司。
但当一项业务是高质量的时,市场往往会将其抬高到反映这一点的价格。相对于当前价格反映的利润增长预期,也必须考虑利润可能增长的速度。因此,你可能想看看这张数据丰富的公司预测互动图表。
当然了,如果你把目光投向别处,你可能会发现这是一笔很棒的投资。所以让我们来看看这个免费有趣的公司名单。
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。
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moomoo是Moomoo Technologies Inc.公司提供的金融信息和交易应用程序。
在美国,moomoo上的投资产品和服务由Moomoo Financial Inc.提供,一家受美国证券交易委员会(SEC)监管的持牌主体。 Moomoo Financial Inc.是金融业监管局(FINRA)和证券投资者保护公司(SIPC)的成员。
在新加坡,moomoo上的投资产品和服务是通过Moomoo Financial Singapore Pte. Ltd.提供,该公司受新加坡金融管理局(MAS)监管(牌照号码︰CMS101000) ,持有资本市场服务牌照 (CMS) ,持有财务顾问豁免(Exempt Financial Adviser)资质。本内容未经新加坡金融管理局的审查。
在澳大利亚,moomoo上的金融产品和服务是通过Futu Securities (Australia) Ltd提供,该公司是受澳大利亚证券和投资委员会(ASIC)监管的澳大利亚金融服务许可机构(AFSL No. 224663)。请阅读并理解我们的《金融服务指南》、《条款与条件》、《隐私政策》和其他披露文件,这些文件可在我们的网站 https://www.moomoo.com/au中获取。
在加拿大,通过moomoo应用提供的仅限订单执行的券商服务由Moomoo Financial Canada Inc.提供,并受加拿大投资监管机构(CIRO)监管。
在马来西亚,moomoo上的投资产品和服务是通过Moomoo Securities Malaysia Sdn. Bhd. 提供,该公司受马来西亚证券监督委员会(SC)监管(牌照号码︰eCMSL/A0397/2024) ,持有资本市场服务牌照 (CMSL) 。本内容未经马来西亚证券监督委员会的审查。
Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd., Futu Securities (Australia) Ltd, Moomoo Financial Canada Inc.,和Moomoo Securities Malaysia Sdn. Bhd.是关联公司。
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