Avid Bioservices' (NASDAQ:CDMO) stock is up by a considerable 22% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Particularly, we will be paying attention to Avid Bioservices' ROE today.
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.
Check out our latest analysis for Avid Bioservices
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 Avid Bioservices is:
69% = US$123m ÷ US$179m (Based on the trailing twelve months to July 2022).
The 'return' is the profit over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.69 in profit.
Why Is ROE Important For Earnings Growth?
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.
A Side By Side comparison of Avid Bioservices' Earnings Growth And 69% ROE
First thing first, we like that Avid Bioservices has an impressive ROE. Secondly, even when compared to the industry average of 23% the company's ROE is quite impressive. As a result, Avid Bioservices' exceptional 71% net income growth seen over the past five years, doesn't come as a surprise.
As a next step, we compared Avid Bioservices' net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 21%.
NasdaqCM:CDMO Past Earnings Growth September 8th 2022
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is Avid Bioservices fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Avid Bioservices Efficiently Re-investing Its Profits?
Avid Bioservices 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
Overall, we are quite pleased with Avid Bioservices' 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. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
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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.
過去三個月，艾維德生物服務公司(納斯達克代碼：CDMO)的股票大幅上漲了22%。鑑於該公司令人印象深刻的業績，我們決定更仔細地研究其財務指標，因為公司的長期財務健康狀況通常決定着市場結果。今天，我們將特別關注艾維德生物服務公司的淨資產收益率。
股本回報率(ROE)是用來評估公司管理層利用公司資本效率的關鍵指標。換句話説，這是一個衡量公司股東提供的資本回報率的盈利比率。
查看我們對Avid生物服務的最新分析
如何計算股本回報率？
這個股本回報率公式是：
股本回報率=(持續經營的)淨利潤？股東權益
因此，根據上述公式，艾維德生物服務的淨資產收益率為：
69%=1.23億美元×1.79億美元(基於截至2022年7月的12個月)。
“收益”是過去12個月的利潤。另一種説法是，公司每持有價值1美元的股票，就能賺取0.69美元的利潤。
為什麼淨資產收益率對收益增長很重要？
我們已經證實，淨資產收益率是一家公司未來收益的有效盈利指標。根據公司將這些利潤再投資或“保留”多少，以及這樣做的效率如何，我們就能夠評估一家公司的收益增長潛力。假設其他條件不變，淨資產收益率和利潤保留率越高，與不一定具有這些特徵的公司相比，公司的增長率就越高。
艾維德生物服務公司盈利增長與淨資產收益率69%的並列比較
首先，我們喜歡艾維德生物服務公司令人印象深刻的淨資產收益率。其次，即使與23%的行業平均水平相比，該公司的淨資產收益率也相當令人印象深刻。因此，過去五年，艾維德生物服務公司的淨收入增長了71%，這並不令人意外。
下一步，我們將艾維德生物服務的淨收入增長與行業進行了比較，令人欣喜的是，我們發現該公司看到的增長高於行業平均21%的增長。
NasdaqCM：CDMO過去的收益增長2022年9月8日
賦予一家公司價值的基礎在很大程度上與其盈利增長掛鈎。投資者下一步需要確定的是，預期的收益增長是否已經計入了股價。這有助於他們確定這隻股票是為光明還是黯淡的未來做準備。與其他公司相比，艾維德生物服務公司的價值是否公平？這3個估值指標可能會幫助你做出決定。
艾維德生物服務公司是否有效地對其利潤進行了再投資？
Avid生物服務公司不向股東支付任何股息，這意味着該公司一直在將所有利潤再投資於業務。這很可能是推動上述高收益增長數字的原因。
結論
總體而言，我們對艾維德生物服務公司的表現相當滿意。特別是，很高興看到該公司在業務上投入了大量資金，並獲得了高回報率，這導致了其收益的可觀增長。在這種情況下，根據最新的行業分析師預測，該公司未來的收益預計將縮水。要了解更多有關該公司未來收益增長預測的信息，請查看以下內容免費報告分析師對該公司的預測，以瞭解更多信息。
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本文由Simply Wall St.撰寫，具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論，我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議，也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意，我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
