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A Closer Look At Gilead Sciences, Inc.'s (NASDAQ:GILD) Impressive ROE
A Closer Look At Gilead Sciences, Inc.'s (NASDAQ:GILD) Impressive ROE
Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to examine Gilead Sciences, Inc. (NASDAQ:GILD), by way of a worked example.
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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
How To Calculate Return On Equity?
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Gilead Sciences is:
25% = US$5.6b ÷ US$23b (Based on the trailing twelve months to December 2023).
The 'return' is the income the business earned over the last year. That means that for every $1 worth of shareholders' equity, the company generated $0.25 in profit.
Does Gilead Sciences Have A Good ROE?
One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. Pleasingly, Gilead Sciences has a superior ROE than the average (16%) in the Biotechs industry.
That is a good sign. Bear in mind, a high ROE doesn't always mean superior financial performance. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. To know the 3 risks we have identified for Gilead Sciences visit our risks dashboard for free.
The Importance Of Debt To 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 two cases, the ROE will capture this use of capital to grow. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.
Combining Gilead Sciences' Debt And Its 25% Return On Equity
Gilead Sciences does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.10. There's no doubt the ROE is impressive, but it's worth keeping in mind that the metric could have been lower if the company were to reduce its debt. 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 a useful indicator of the ability of a business to generate profits and return them to shareholders. A company that can achieve a high return on equity without debt could be considered a high quality business. 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 ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So you might want to take a peek at this data-rich interactive graph of forecasts for the company.
If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.
Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to examine Gilead Sciences, Inc. (NASDAQ:GILD), by way of a worked example.
许多投资者仍在学习分析股票时可能有用的各种指标。本文适用于那些想了解股本回报率(ROE)的人。举一个有效的例子,我们将使用投资回报率来研究吉利德科学公司(纳斯达克股票代码:GILD)。
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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
股本回报率或投资回报率是用于评估公司管理层利用公司资本效率的关键指标。换句话说,它是衡量公司股东提供的资本回报率的盈利比率。
How To Calculate Return On Equity?
如何计算股本回报率?
The formula for return on equity is:
股本回报率的公式是:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
股本回报率 = 净利润(来自持续经营业务)÷ 股东权益
So, based on the above formula, the ROE for Gilead Sciences is:
因此,根据上述公式,吉利德科学的投资回报率为:
25% = US$5.6b ÷ US$23b (Based on the trailing twelve months to December 2023).
25% = 56亿美元 ÷ 230亿美元(基于截至2023年12月的过去十二个月)。
The 'return' is the income the business earned over the last year. That means that for every $1 worth of shareholders' equity, the company generated $0.25 in profit.
“回报” 是企业在过去一年中获得的收入。这意味着,每获得价值1美元的股东权益,该公司就会产生0.25美元的利润。
Does Gilead Sciences Have A Good ROE?
吉利德科学有良好的投资回报率吗?
One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. Pleasingly, Gilead Sciences has a superior ROE than the average (16%) in the Biotechs industry.
确定公司股本回报率是否不错的一种简单方法是将其与该行业的平均水平进行比较。这种方法的局限性在于,有些公司与其他公司有很大不同,即使在相同的行业分类中也是如此。令人高兴的是,吉利德科学的投资回报率高于生物技术行业的平均水平(16%)。
That is a good sign. Bear in mind, a high ROE doesn't always mean superior financial performance. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. To know the 3 risks we have identified for Gilead Sciences visit our risks dashboard for free.
这是一个好兆头。请记住,高投资回报率并不总是意味着卓越的财务业绩。除了净收入的变化外,较高的投资回报率也可能是高债务相对于股本的结果,这表明存在风险。要了解我们为吉利德科学确定的三种风险,请免费访问我们的风险仪表板。
The Importance Of Debt To Return On Equity
债务对股本回报率的重要性
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 two cases, the ROE will capture this use of capital to grow. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.
几乎所有公司都需要资金来投资业务,以增加利润。投资现金可以来自上一年的利润(留存收益)、发行新股或借款。在前两个案例中,投资回报率将利用这种资本来增长。在后一种情况下,增长所需的债务将提高回报,但不会影响股东权益。因此,使用债务可以提高投资回报率,尽管比喻地说,暴风雨天气会带来额外的风险。
Combining Gilead Sciences' Debt And Its 25% Return On Equity
合并吉利德科学的债务及其25%的股本回报率
Gilead Sciences does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.10. There's no doubt the ROE is impressive, but it's worth keeping in mind that the metric could have been lower if the company were to reduce its debt. 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.
吉利德科学确实使用大量债务来增加回报。它的负债权益比率为1.10。毫无疑问,投资回报率令人印象深刻,但值得记住的是,如果该公司减少债务,该指标可能会更低。投资者应该仔细考虑如果一家公司无法如此轻易地借款,其表现会如何,因为信贷市场确实会随着时间的推移而发生变化。
Summary
摘要
Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. A company that can achieve a high return on equity without debt could be considered a high quality business. 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.
股本回报率是衡量企业创造利润并将其返还给股东的能力的有用指标。能够在没有债务的情况下实现高股本回报率的公司可以被视为高质量的企业。如果两家公司的债务与股权比率大致相同,而一家公司的投资回报率更高,那么我通常更喜欢投资回报率更高的那家公司。
But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So you might want to take a peek at this data-rich interactive graph of forecasts for the company.
但是投资回报率只是更大难题中的一部分,因为高质量的企业通常以高倍的收益进行交易。与股票价格所反映的预期相比,利润增长率尤其值得考虑。因此,你可能想看看这张数据丰富的公司预测交互式图表。
If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
如果你更愿意去另一家公司——一家财务状况可能优越的公司——那么千万不要错过这份免费的股本回报率高、债务低的有趣公司的名单。
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.
对这篇文章有反馈吗?对内容感到担忧?直接联系我们。 或者,给编辑团队 (at) simplywallst.com 发送电子邮件。
Simply Wall St的这篇文章本质上是笼统的。我们仅使用公正的方法根据历史数据和分析师的预测提供评论,我们的文章无意作为财务建议。它不构成买入或卖出任何股票的建议,也没有考虑到您的目标或财务状况。我们的目标是为您提供由基本数据驱动的长期重点分析。请注意,我们的分析可能不考虑最新的价格敏感型公司公告或定性材料。简而言之,华尔街没有持有任何上述股票的头寸。
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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。
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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。
风险及免责提示
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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