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.
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.
許多投資者仍在學習在分析股票時可能有用的各種指標。這篇文章是為那些想了解股本回報率(ROE)的人準備的。通過邊做邊學的方式,我們將看到淨資產收益率,以更好地瞭解四川僑源燃氣股份有限公司(SZSE:301286)。
股本回報率或淨資產收益率是股東要考慮的一個重要因素,因為它告訴他們他們的資本再投資的效率。換句話説,它揭示了該公司成功地將股東投資轉化為利潤。
查看我們對四川僑源燃氣有限公司的最新分析
淨資產收益率是如何計算的?
可使用以下公式計算淨資產收益率:
股本回報率=(持續經營的)淨利潤?股東權益
因此,根據上述公式,四川僑源燃氣股份有限公司的淨資產收益率為:
8.3%=1.24億元×15億元(以截至2022年6月的12個月為基礎)。
“回報”指的是一家公司過去一年的收益。因此,這意味着股東每投資1元人民幣,公司就會產生0.08元的利潤。
四川僑源燃氣股份有限公司的淨資產收益率好嗎?
確定一家公司是否擁有良好的股本回報率的一個簡單方法是將其與所在行業的平均水平進行比較。重要的是,這遠遠不是一個完美的衡量標準,因為在同一行業分類中,公司的差異很大。如果你看下面的圖片,你可以看到四川僑源燃氣有限公司的淨資產收益率低於化工行業分類的平均水平(11%)。
深圳證券交易所:301286股本回報率2022年9月21日
這不是我們希望看到的。不過,我們認為,較低的淨資產收益率仍可能意味着,如果一家公司現有的債務水平較低,那麼它就有機會通過使用槓桿來提高回報。一家高負債、淨資產收益率低的公司則完全是另一回事,在我們的賬面上是一種高風險的投資。要了解我們為四川僑源天然氣有限公司確定的兩個風險,請免費訪問我們的風險儀錶板。
為什麼在考慮淨資產收益率時應該考慮債務
公司通常需要投入資金來增加利潤。投資的現金可以來自上一年的利潤(留存收益)、發行新股或借款。在第一種和第二種情況下,淨資產收益率將反映對企業投資的現金使用情況。在後一種情況下,債務的使用將提高回報,但不會改變股權。因此,債務的使用可以提高淨資產收益率,儘管打個比方説,在暴風雨天氣的情況下會有額外的風險。
結合四川僑源燃氣有限公司的債務及其8.3%的股本回報率
四川僑源燃氣有限公司的負債權益比為0.32,遠遠不算過高。我對它的淨資產收益率不太滿意,但債務水平並不太高,這表明該公司的前景還不錯。明智地利用債務來提高回報當然是一件好事,儘管它確實略微提高了風險,並減少了未來的選擇權。
結論
股本回報率是衡量一家企業產生利潤並將其返還給股東的能力的有用指標。在我們的賬目中,最高質量的公司擁有高股本回報率,儘管債務水平較低。如果兩家公司的債務權益比大致相同,而其中一家公司的淨資產收益率更高,我通常會更喜歡淨資產收益率更高的那家公司。
話雖如此,雖然淨資產收益率是衡量業務質量的有用指標,但你必須考慮一系列因素,才能確定購買股票的合適價格。重要的是要考慮其他因素,比如未來的利潤增長,以及未來需要多少投資。你可以通過查看這篇免費的文章來了解該公司過去是如何發展壯大的詳細圖表過去的收益、收入和現金流。
如果你更願意看看另一家公司--一家財務狀況可能更好的公司--那麼不要錯過這一點免費列出了一些有趣的公司,這些公司擁有高股本回報率和低債務。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。