SITC International Holdings' (HKG:1308) stock up by 4.7% over the past three months. Since the market usually pay for a company's long-term financial health, we decided to study the company's fundamentals to see if they could be influencing the market. Specifically, we decided to study SITC International Holdings' ROE in this article.
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
How Do You 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 SITC International Holdings is:
28% = US$536m ÷ US$1.9b (Based on the trailing twelve months to December 2023).
The 'return' is the profit over the last twelve months. Another way to think of that is that for every HK$1 worth of equity, the company was able to earn HK$0.28 in profit.
Why Is ROE Important For Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.
A Side By Side comparison of SITC International Holdings' Earnings Growth And 28% ROE
To begin with, SITC International Holdings has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 8.6% also doesn't go unnoticed by us. So, the substantial 36% net income growth seen by SITC International Holdings over the past five years isn't overly surprising.
We then compared SITC International Holdings' net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 25% in the same 5-year period.
Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. 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 SITC International Holdings is trading on a high P/E or a low P/E, relative to its industry.
Is SITC International Holdings Making Efficient Use Of Its Profits?
SITC International Holdings has a significant three-year median payout ratio of 70%, meaning the company only retains 30% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.
Besides, SITC International Holdings has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 80%. As a result, SITC International Holdings' ROE is not expected to change by much either, which we inferred from the analyst estimate of 28% for future ROE.
Conclusion
Overall, we are quite pleased with SITC International Holdings' performance. In particular, its high ROE is quite noteworthy and also the probable explanation behind its considerable earnings growth. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. 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.
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.
SITC International Holdings(HKG:1308)の株価は過去3か月で4.7%上昇しています。ゆえに、市場は通常、企業の長期的な財務状況に支払いを行うため、同社のファンダメンタルズを調べ、市場に影響を与えている可能性があるかどうかを調べることにしました。具体的には、この記事では、SITC International HoldingsのROEを調査することにしました。
まず第一に、SITC International Holdingsは興味深い非常に高いROEを持っています。第二に、業界平均ROE(8.6%)との比較も我々の目には逃れません。したがって、過去5年間にSITC International Holdingsが見た36%の純利益成長はあまり驚くことではありません。
次に、SITC International Holdingsの純利益成長を業界と比較しましたが、同社の成長率が同じ5年間に25%の成長率を持つ業界と比較して高いことが分かって喜んでいます。
SITC International Holdingsは、その利益の大部分を株主に配当しているため、3年間の中央値の配当比率が70%とかなり高いです。これは、同社が株主に大半の利益を返却しているにもかかわらず、高い収益成長を達成できたことを意味します。
さらに、SITC International Holdingsは、少なくとも10年以上の期間、配当を支払っています。これは、同社が利益を株主と共有することに取り組んでいることを示しています。最新のアナリストの見通しに基づいて、同社の将来の配当比率は次の3年間で80%で一定の水準を保つとのことです。その結果、SITC International HoldingsのROEもあまり変化しないと推測しました。将来のROEのアナリストの見通しは28%です。
総合的に、当社はSITC International Holdingsのパフォーマンスにかなり満足しています。特に、高いROEは非常に注目に値し、大きな収益成長の背後にあるおそらくの説明でもあります。ただし、同社はわずかな利益を保有しているため、その利益にもかかわらず収益を伸ばすことができたということになります。これはそれほど悪くありません。そのように言われると、最新の業界アナリストの予測では、同社の収益成長率が低下すると予想されています。同社の将来の収益成長見通しについてもっと知りたい場合は、同社のアナリスト予測に関するこの無料レポートを確認してください。
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以上から、SITC International Holdingsの業績にかなり満足しています。特に、高いROEは非常に注目に値し、大きな収益成長の背後にあるおそらくの説明でもあります。ただし、同社はわずかな利益を保有しているため、その利益にもかかわらず収益を伸ばすことができたということになります。これはそれほど悪くありません。そのように言われると、最新の業界アナリストの予測では、同社の収益成長率が低下すると予想されています。同社の将来の収益成長見通しについてもっと知りたい場合は、同社のアナリスト予測に関するこの無料レポートを確認してください。