# Daoming Optics&Chemical Co.,Ltd (SZSE:002632) Stock's On A Decline: Are Poor Fundamentals The Cause?

Daoming Optics & Chemical Co.，Ltd (SZSE：002632）股價下跌：基本面不佳是原因嗎？
Simply Wall St ·  07/18 22:30

With its stock down 14% over the past month, it is easy to disregard Daoming Optics&ChemicalLtd (SZSE:002632). We decided to study the company's financials to determine if the downtrend will continue as the long-term performance of a company usually dictates market outcomes. In this article, we decided to focus on Daoming Optics&ChemicalLtd's ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

roe指股東權益回報率，是一種有用的工具，用於評估公司如何有效地從股東獲得的投資中產生回報。簡單來說，這衡量了一家公司相對於股東權益的盈利能力。

## 淨資產收益率怎麼計算？

The formula for ROE is:

roe的公式是：

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Daoming Optics&ChemicalLtd is:

7.3% = CN¥166m ÷ CN¥2.3b (Based on the trailing twelve months to March 2024).

7.3% = CN¥16600萬 ÷ CN¥23億（基於截至2024年3月的最近十二個月計算）。

The 'return' is the income the business earned over the last year. Another way to think of that is that for every CN¥1 worth of equity, the company was able to earn CN¥0.07 in profit.

‘回報’是企業公司過去一年所獲得的收益。可以這樣思考，即對於每1元人民幣的淨資產，公司能夠賺取0.07元的利潤。

## ROE與盈利增長有什麼關係？

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 all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

## 大明光學化工有限公司的盈利增長和7.3%的ROE相互比較。

When you first look at it, Daoming Optics&ChemicalLtd's ROE doesn't look that attractive. However, its ROE is similar to the industry average of 6.4%, so we won't completely dismiss the company. On the other hand, Daoming Optics&ChemicalLtd reported a fairly low 3.0% net income growth over the past five years. Remember, the company's ROE is not particularly great to begin with. So this could also be one of the reasons behind the company's low growth in earnings.

Next, on comparing with the industry net income growth, we found that Daoming Optics&ChemicalLtd's reported growth was lower than the industry growth of 7.8% over the last few years, which is not something we like to see.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Daoming Optics&ChemicalLtd's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

## 大明光學化工有限公司是否高效地再投資利潤？

The high three-year median payout ratio of 85% (that is, the company retains only 15% of its income) over the past three years for Daoming Optics&ChemicalLtd suggests that the company's earnings growth was lower as a result of paying out a majority of its earnings.

In addition, Daoming Optics&ChemicalLtd has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth.

## 總的來說，我們對偉明環保的表現非常滿意。具體而言，我們喜歡公司以高回報率再投資了其利潤的很大一部分。當然，這導致公司的收益大幅增長。但是，最新的行業分析師預測表明，該公司的收益預計將加速增長。

Overall, we would be extremely cautious before making any decision on Daoming Optics&ChemicalLtd. Because the company is not reinvesting much into the business, and given the low ROE, it's not surprising to see the lack or absence of growth in its earnings. In brief, we think the company is risky and investors should think twice before making any final judgement on this company. Our risks dashboard would have the 3 risks we have identified for Daoming Optics&ChemicalLtd.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com