Shoucheng Holdings' (HKG:697) stock is up by a considerable 19% over the past three months. However, in this article, we decided to focus on its weak fundamentals, as long-term financial performance of a business is what ultimatley dictates market outcomes. In this article, we decided to focus on Shoucheng Holdings' ROE.
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. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
View our latest analysis for Shoucheng Holdings
How Is ROE Calculated?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Shoucheng Holdings is:
8.2% = HK$881m ÷ HK$11b (Based on the trailing twelve months to June 2022).
The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each HK$1 of shareholders' capital it has, the company made HK$0.08 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.
Shoucheng Holdings' Earnings Growth And 8.2% ROE
At first glance, Shoucheng Holdings' ROE doesn't look very promising. However, given that the company's ROE is similar to the average industry ROE of 7.7%, we may spare it some thought. But then again, Shoucheng Holdings' five year net income shrunk at a rate of 25%. Remember, the company's ROE is a bit low to begin with. Therefore, the decline in earnings could also be the result of this.
So, as a next step, we compared Shoucheng Holdings' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 7.7% in the same period.
SEHK:697 Past Earnings Growth August 29th 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. Doing so will help them establish if the stock's future looks promising or ominous. What is 697 worth today? The intrinsic value infographic in our free research report helps visualize whether 697 is currently mispriced by the market.
Is Shoucheng Holdings Efficiently Re-investing Its Profits?
With a high three-year median payout ratio of 76% (implying that 24% of the profits are retained), most of Shoucheng Holdings' profits are being paid to shareholders, which explains the company's shrinking earnings. The business is only left with a small pool of capital to reinvest - A vicious cycle that doesn't benefit the company in the long-run. Our risks dashboard should have the 2 risks we have identified for Shoucheng Holdings.
Additionally, Shoucheng Holdings has paid dividends over a period of three years, which means that the company's management is rather focused on keeping up its dividend payments, regardless of the shrinking earnings.
Conclusion
In total, we would have a hard think before deciding on any investment action concerning Shoucheng Holdings. As a result of its low ROE and lack of much reinvestment into the business, the company has seen a disappointing earnings growth rate. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. You can do your own research on Shoucheng Holdings and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.
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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.
寿成控股(HKG:697)的股票在过去三个月中大幅上涨了19%。然而,在本文中,我们决定将重点放在其疲弱的基本面上,因为企业的长期财务业绩是最终决定市场结果的因素。在本文中,我们决定将重点放在首诚控股的净资产收益率上。
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。简而言之,它是用来评估一家公司相对于其权益资本的盈利能力。
查看我们对首诚控股的最新分析
净资产收益率是如何计算的?
这个净资产收益率公式是:
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,首城控股的净资产收益率为:
8.2%=8.81亿港元×110亿港元(根据截至2022年6月的过去12个月计算)。
“收益”是过去12个月的利润。一种将其概念化的方法是,公司每持有1港元的股东资本,就能获得0.08港元的利润。
为什么净资产收益率对收益增长很重要?
我们已经证实,净资产收益率是一家公司未来收益的有效盈利指标。根据公司将这些利润再投资或“保留”多少,以及这样做的效率如何,我们就能够评估一家公司的收益增长潜力。假设其他条件不变,净资产收益率和利润保留率越高,与不一定具有这些特征的公司相比,公司的增长率就越高。
首诚控股盈利增长8.2%净资产收益率
乍一看,首诚控股的净资产收益率(ROE)看起来并不是很有希望。然而,鉴于该公司的净资产收益率(ROE)与7.7%的行业平均ROE相似,我们或许可以省去一些思考。但话又说回来,寿成控股的五年净利润以25%的速度缩水。请记住,该公司的净资产收益率从一开始就有点低。因此,盈利下降也可能是这一点的结果。
因此,下一步,我们将寿成控股的表现与行业进行了比较,令人失望的是,尽管该公司的收益一直在缩水,但同期该行业的收益一直以7.7%的速度增长。
联交所:697过去盈利增长2022年8月29日
赋予一家公司价值的基础在很大程度上与其盈利增长挂钩。投资者下一步需要确定的是,预期的收益增长是否已经计入了股价。这样做将有助于他们确定该股的未来看起来是光明的还是不祥的。今天697值多少钱?我们免费研究报告中的内在价值信息图有助于直观地了解697目前是否被市场错误定价。
寿成控股是否有效地对其利润进行了再投资?
由于三年的派息率中值高达76%(意味着24%的利润被保留),寿成控股的大部分利润都支付给了股东,这解释了该公司收益缩水的原因。这家企业只剩下一小部分资金可以再投资--这是一个恶性循环,从长远来看对公司没有好处。我们的风险仪表板应该有我们为寿成控股确定的两个风险。
此外,寿成控股在三年内支付了股息,这意味着公司管理层更专注于保持股息支付,而不是考虑收益的缩水。
结论
总而言之,在决定对寿成控股采取任何投资行动之前,我们会三思而后行。由于净资产收益率较低,对该业务的再投资不足,该公司的收益增长率令人失望。到目前为止,我们只是通过观察公司的基本面来了解公司过去的业绩。你可以自己研究首成控股,看看它在过去的表现如何,通过查看这个免费的详细图表过去的收益、收入和现金流。
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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。