Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). By way of learning-by-doing, we'll look at ROE to gain a better understanding of Sichuan Qiaoyuan Gas Co.,Ltd (SZSE:301286).
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. Put another way, it reveals the company's success at turning shareholder investments into profits.
See our latest analysis for Sichuan Qiaoyuan GasLtd
How Is ROE Calculated?
ROE 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 Sichuan Qiaoyuan GasLtd is:
8.3% = CN¥124m ÷ CN¥1.5b (Based on the trailing twelve months to June 2022).
The 'return' refers to a company's earnings over the last year. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.08.
Does Sichuan Qiaoyuan GasLtd Have A Good ROE?
One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. If you look at the image below, you can see Sichuan Qiaoyuan GasLtd has a lower ROE than the average (11%) in the Chemicals industry classification.
![roe](https://usnewsfile.futunn.com/pic/0-14890949-0-7437db689b4d3da1cf55e936e5760284.png/big)
SZSE:301286 Return on Equity September 21st 2022
That's not what we like to see. Although, we think that a lower ROE could still mean that a company has the opportunity to better its returns with the use of leverage, provided its existing debt levels are low. A high debt company having a low ROE is a different story altogether and a risky investment in our books. To know the 2 risks we have identified for Sichuan Qiaoyuan GasLtd visit our risks dashboard for free.
Why You Should Consider Debt When Looking At ROE
Companies usually need to invest money to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the use of debt will improve the returns, but will not change the equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.
Combining Sichuan Qiaoyuan GasLtd's Debt And Its 8.3% Return On Equity
Sichuan Qiaoyuan GasLtd has a debt to equity ratio of 0.32, which is far from excessive. I'm not impressed with its ROE, but the debt levels are not too high, indicating the business has decent prospects. Judicious use of debt to improve returns can certainly be a good thing, although it does elevate risk slightly and reduce future optionality.
Conclusion
Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE.
Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. You can see how the company has grow in the past by looking at this FREE detailed graph of past earnings, revenue and cash flow.
If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
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.
许多投资者仍在学习在分析股票时可能有用的各种指标。这篇文章是为那些想了解股本回报率(ROE)的人准备的。通过边做边学的方式,我们将看到净资产收益率,以更好地了解四川侨源燃气股份有限公司(SZSE:301286)。
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。换句话说,它揭示了该公司成功地将股东投资转化为利润。
查看我们对四川侨源燃气有限公司的最新分析
净资产收益率是如何计算的?
可使用以下公式计算净资产收益率:
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,四川侨源燃气股份有限公司的净资产收益率为:
8.3%=1.24亿元×15亿元(以截至2022年6月的12个月为基础)。
“回报”指的是一家公司过去一年的收益。因此,这意味着股东每投资1元人民币,公司就会产生0.08元的利润。
四川侨源燃气股份有限公司的净资产收益率好吗?
确定一家公司是否拥有良好的股本回报率的一个简单方法是将其与所在行业的平均水平进行比较。重要的是,这远远不是一个完美的衡量标准,因为在同一行业分类中,公司的差异很大。如果你看下面的图片,你可以看到四川侨源燃气有限公司的净资产收益率低于化工行业分类的平均水平(11%)。
![roe](https://usnewsfile.futunn.com/pic/0-14890949-0-7437db689b4d3da1cf55e936e5760284.png/big)
深圳证券交易所:301286股本回报率2022年9月21日
这不是我们希望看到的。不过,我们认为,较低的净资产收益率仍可能意味着,如果一家公司现有的债务水平较低,那么它就有机会通过使用杠杆来提高回报。一家高负债、净资产收益率低的公司则完全是另一回事,在我们的账面上是一种高风险的投资。要了解我们为四川侨源天然气有限公司确定的两个风险,请免费访问我们的风险仪表板。
为什么在考虑净资产收益率时应该考虑债务
公司通常需要投入资金来增加利润。投资的现金可以来自上一年的利润(留存收益)、发行新股或借款。在第一种和第二种情况下,净资产收益率将反映对企业投资的现金使用情况。在后一种情况下,债务的使用将提高回报,但不会改变股权。因此,债务的使用可以提高净资产收益率,尽管打个比方说,在暴风雨天气的情况下会有额外的风险。
结合四川侨源燃气有限公司的债务及其8.3%的股本回报率
四川侨源燃气有限公司的负债权益比为0.32,远远不算过高。我对它的净资产收益率不太满意,但债务水平并不太高,这表明该公司的前景还不错。明智地利用债务来提高回报当然是一件好事,尽管它确实略微提高了风险,并减少了未来的选择权。
结论
股本回报率是衡量一家企业产生利润并将其返还给股东的能力的有用指标。在我们的账目中,最高质量的公司拥有高股本回报率,尽管债务水平较低。如果两家公司的债务权益比大致相同,而其中一家公司的净资产收益率更高,我通常会更喜欢净资产收益率更高的那家公司。
话虽如此,虽然净资产收益率是衡量业务质量的有用指标,但你必须考虑一系列因素,才能确定购买股票的合适价格。重要的是要考虑其他因素,比如未来的利润增长,以及未来需要多少投资。你可以通过查看这篇免费的文章来了解该公司过去是如何发展壮大的详细图表过去的收益、收入和现金流。
如果你更愿意看看另一家公司--一家财务状况可能更好的公司--那么不要错过这一点免费列出了一些有趣的公司,这些公司拥有高股本回报率和低债务。
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。