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). We'll use ROE to examine Shenzhen Neptunus Bioengineering Co., Ltd. (SZSE:000078), by way of a worked example.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
View our latest analysis for Shenzhen Neptunus Bioengineering
How To 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 Shenzhen Neptunus Bioengineering is:
1.7% = CN¥124m ÷ CN¥7.4b (Based on the trailing twelve months to September 2022).
The 'return' refers to a company's earnings 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¥0.02 in profit.
Does Shenzhen Neptunus Bioengineering Have A Good ROE?
By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. 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 Shenzhen Neptunus Bioengineering has a lower ROE than the average (9.8%) in the Healthcare industry classification.
SZSE:000078 Return on Equity December 26th 2022
That certainly isn't ideal. However, a low ROE is not always bad. If the company's debt levels are moderate to low, then there's still a chance that returns can be improved via the use of financial leverage. A company with high debt levels and low ROE is a combination we like to avoid given the risk involved. You can see the 2 risks we have identified for Shenzhen Neptunus Bioengineering by visiting our risks dashboard for free on our platform here.
How Does Debt Impact ROE?
Virtually all companies need money to invest in the business, to grow profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the use of debt will improve the returns, but will not change the equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same.
Shenzhen Neptunus Bioengineering's Debt And Its 1.7% ROE
It's worth noting the high use of debt by Shenzhen Neptunus Bioengineering, leading to its debt to equity ratio of 1.57. With a fairly low ROE, and significant use of debt, it's hard to get excited about this business at the moment. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it.
Conclusion
Return on equity is one way we can compare its business quality of different companies. Companies that can achieve high returns on equity without too much debt are generally of good quality. If two companies have the same ROE, then I would generally prefer the one with less debt.
But when a business is high quality, the market often bids it up to a price that reflects this. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. 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.
Of course Shenzhen Neptunus Bioengineering may not be the best stock to buy. So you may wish to see this free collection of other companies that have high ROE and low debt.
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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.
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。我们将使用净资产收益率来考察深圳海王星生物工程有限公司(深圳证券交易所：000078)，作为一个实例。
股本回报率(ROE)是用来评估公司管理层利用公司资本效率的关键指标。简而言之，净资产收益率显示了每一美元相对于其股东投资产生的利润。
查看我们对深圳海王星生物工程的最新分析
如何计算股本回报率？
股本回报率可使用以下公式计算：
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，深圳海王星生物工程的净资产收益率为：
1.7%=1.24亿元×74亿元(以截至2022年9月的12个月为基础)。
“回报”指的是一家公司过去一年的收益。另一种说法是，公司每持有价值1元的股权，就能赚取0.02元的利润。
深圳海王星生物工程的净资产收益率高吗？
通过将一家公司的净资产收益率(ROE)与其行业平均水平进行比较，我们可以快速衡量它有多好。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。如果你看下图，你可以看到深圳海王星生物工程的净资产收益率低于医疗行业分类的平均水平(9.8%)。
深圳证券交易所：000078股本回报率2022年12月26日
这当然不是理想的情况。然而，较低的净资产收益率并不总是坏事。如果公司的债务水平处于中低水平，那么仍有机会通过使用财务杠杆来提高回报。考虑到涉及的风险，高债务水平和低ROE的公司是我们希望避免的组合。您可以通过访问我们的风险控制面板在我们的平台上是免费的。
债务对净资产收益率有何影响？
几乎所有的公司都需要资金来投资于业务，以增加利润。这些现金可以来自留存收益、发行新股(股权)或债务。在第一种和第二种选择的情况下，净资产收益率将反映现金用于增长的这种情况。在后一种情况下，债务的使用将提高回报，但不会改变股权。在这种情况下，债务的使用将提高净资产收益率，即使企业的核心经济保持不变。
深圳海王星生物工程的债务及其1.7%的净资产收益率
值得注意的是，深圳海王星生物工程高度利用债务，导致其债务权益比为1.57。由于净资产收益率(ROE)相当低，而且大量使用债务，目前很难对这项业务感到兴奋。债务增加了风险，减少了公司未来的选择，所以你通常希望看到使用它的一些良好回报。
结论
股本回报率是我们比较不同公司业务质量的一种方式。能够在没有太多债务的情况下实现高股本回报率的公司通常质量良好。如果两家公司的净资产收益率相同，那么我通常会倾向于债务较少的那一家。
但当一项业务是高质量的时，市场往往会将其抬高到反映这一点的价格。相对于当前价格反映的利润增长预期，也必须考虑利润可能增长的速度。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。
当然了深圳海王星生物工程可能不是买入的最佳股票。所以你可能想看看这个免费其他拥有高ROE和低债务的公司的集合。
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。
