Guangdong Huafeng New Energy TechnologyLtd's (SZSE:002806) stock is up by a considerable 24% over the past three months. But the company's key financial indicators appear to be differing across the board and that makes us question whether or not the company's current share price momentum can be maintained. Specifically, we decided to study Guangdong Huafeng New Energy TechnologyLtd's 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. Put another way, it reveals the company's success at turning shareholder investments into profits.
Check out our latest analysis for Guangdong Huafeng New Energy TechnologyLtd
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 Guangdong Huafeng New Energy TechnologyLtd is:
6.8% = CN¥84m ÷ CN¥1.2b (Based on the trailing twelve months to March 2022).
The 'return' is the income the business earned over the last year. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.07.
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 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.
Guangdong Huafeng New Energy TechnologyLtd's Earnings Growth And 6.8% ROE
When you first look at it, Guangdong Huafeng New Energy TechnologyLtd's ROE doesn't look that attractive. We then compared the company's ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 8.5%. Given the circumstances, the significant decline in net income by 46% seen by Guangdong Huafeng New Energy TechnologyLtd over the last five years is not surprising. We believe that there also might be other aspects that are negatively influencing the company's earnings prospects. For example, it is possible that the business has allocated capital poorly or that the company has a very high payout ratio.
So, as a next step, we compared Guangdong Huafeng New Energy TechnologyLtd's 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 14% in the same period.
SZSE:002806 Past Earnings Growth August 29th 2022
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. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. 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 Guangdong Huafeng New Energy TechnologyLtd is trading on a high P/E or a low P/E, relative to its industry.
Is Guangdong Huafeng New Energy TechnologyLtd Efficiently Re-investing Its Profits?
While the company did payout a portion of its dividend in the past, it currently doesn't pay a dividend. This implies that potentially all of its profits are being reinvested in the business.
Conclusion
On the whole, we feel that the performance shown by Guangdong Huafeng New Energy TechnologyLtd can be open to many interpretations. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. Wrapping up, we would proceed with caution with this company and one way of doing that would be to look at the risk profile of the business. You can see the 3 risks we have identified for Guangdong Huafeng New Energy TechnologyLtd by visiting our risks dashboard for free on our platform here.
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.
广东华丰新能源科技股份有限公司(深圳证券交易所股票代码:002806)的股票在过去三个月里上涨了24%。但该公司的关键财务指标似乎在所有方面都不同,这让我们质疑该公司目前的股价势头能否保持下去。具体地说,我们决定在本文中研究广东华风新能源科技有限公司的净资产收益率。
股本回报率(ROE)是对一家公司增值和管理投资者资金的效率的测试。换句话说,它揭示了该公司成功地将股东投资转化为利润。
查看我们对广东华丰新能源科技有限公司的最新分析
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,广东华风新能源科技有限公司的净资产收益率为:
6.8%=8400万元×12亿元(以截至2022年3月的12个月为基础)。
“回报”指的是企业在过去一年中获得的收入。因此,这意味着股东每投资1元人民币,公司就会产生0.07元的利润。
为什么净资产收益率对收益增长很重要?
到目前为止,我们了解到净资产收益率是衡量一家公司盈利能力的指标。根据公司选择再投资或“保留”多少利润,我们就能够评估一家公司未来产生利润的能力。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。
广东华风新能源科技有限公司盈利增长6.8%净资产收益率
乍一看,广东华风新能源科技有限公司的净资产收益率(ROE)看起来并不那么吸引人。然后,我们将该公司的净资产收益率(ROE)与更广泛的行业进行了比较,发现净资产收益率低于8.5%的行业平均水平,这让我们感到失望。在这种情况下,广东华风新能源科技有限公司在过去五年中净收入大幅下降46%也就不足为奇了。我们认为,可能还有其他方面对公司的收益前景产生负面影响。例如,可能是企业的资本配置不当,或者公司的派息率非常高。
因此,作为下一步,我们将广东华丰新能源科技有限公司的表现与行业进行了比较,失望地发现,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14%的速度增长。
深圳证交所:过去002806的收益增长2022年8月29日
盈利增长是评估一只股票时需要考虑的一个重要指标。投资者应该尝试确定预期的收益增长或下降是否已计入价格,无论是哪种情况。通过这样做,他们将知道股票是将进入清澈的蓝色水域,还是等待沼泽水域。衡量预期收益增长的一个很好的指标是市盈率,它根据一只股票的盈利前景决定市场愿意为其支付的价格。因此,你可能想看看广东华风新能源科技有限公司相对于其行业是高市盈率还是低市盈率。
广东华风新能源科技有限公司是否有效地将利润再投资?
虽然该公司过去确实支付了一部分股息,但目前它不支付股息。这意味着,它的所有利润可能都将再投资于该业务。
结论
总体而言,我们觉得广东华风新能源科技有限公司的表现可以有多种解读。尽管它似乎保留了大部分利润,但鉴于净资产收益率较低,投资者可能终究不会从所有这些再投资中受益。低收益增长率表明我们的理论是正确的。总而言之,我们将谨慎对待这家公司,其中一种方法是查看业务的风险概况。您可以通过访问我们为广东华丰新能源科技有限公司确定的3个风险风险控制面板在我们的平台上是免费的。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
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。