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). To keep the lesson grounded in practicality, we'll use ROE to better understand Sichuan Qiaoyuan Gas Co.,Ltd (SZSE:301286).
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.
View our latest analysis for Sichuan Qiaoyuan GasLtd
How Do You Calculate Return On Equity?
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Sichuan Qiaoyuan GasLtd is:
8.4% = CN¥130m ÷ CN¥1.6b (Based on the trailing twelve months to September 2022).
The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each CN¥1 of shareholders' capital it has, the company made CN¥0.08 in profit.
Does Sichuan Qiaoyuan GasLtd Have A Good Return On Equity?
Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. If you look at the image below, you can see Sichuan Qiaoyuan GasLtd has a similar ROE to the average in the Chemicals industry classification (9.6%).
SZSE:301286 Return on Equity December 20th 2022
So while the ROE is not exceptional, at least its acceptable. While at least the ROE is not lower than the industry, its still worth checking what role the company's debt plays as high debt levels relative to equity may also make the ROE appear high. If so, this increases its exposure to financial risk. To know the 3 risks we have identified for Sichuan Qiaoyuan GasLtd visit our risks dashboard for free.
The Importance Of Debt To Return On Equity
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 first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' 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 8.4% Return On Equity
Sichuan Qiaoyuan GasLtd has a debt to equity ratio of just 0.081, which is very low. 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.
Summary
Return on equity is useful for comparing the quality of different businesses. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have the same ROE, then I would generally prefer the one with less debt.
But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. Check the past profit growth by Sichuan Qiaoyuan GasLtd by looking at this visualization of past earnings, revenue and cash flow.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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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.
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。為了讓這一課立足於實踐，我們將使用淨資產收益率來更好地瞭解四川僑源燃氣股份有限公司(SZSE：301286)。
股本回報率(ROE)是對一家公司增值和管理投資者資金的效率的測試。換句話說，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
你如何計算股本回報率？
這個股本回報率公式是：
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：
8.4%=CN元1.3億×CN元16億元(基於截至2022年9月的12個月)。
“報稅表”是過去12個月的稅後收入。一種概念化的方法是，公司每擁有1元人民幣的股東資本，就會獲得0.08元人民幣的利潤。
四川僑源燃氣股份有限公司股本回報率高嗎？
可以說，評估公司淨資產收益率最簡單的方法是將其與所在行業的平均水準進行比較。然而，這種方法只是作為一種粗略的檢查，因為在同一行業分類中，公司確實有很大的不同。如果你看下圖，你可以看到四川僑源燃氣有限公司的淨資產收益率(ROE)與化工行業分類的平均水準(9.6%)相似。
深圳證券交易所：301286股本回報率2022年12月20日
因此，雖然淨資產收益率並不例外，但至少是可以接受的。雖然淨資產收益率至少不低於行業，但它仍然值得檢查公司的債務起到了什麼作用，因為債務相對於股權的高水平也可能使淨資產收益率看起來很高。如果是這樣的話，這將增加其金融風險敞口。要了解我們為四川僑源天然氣有限公司確定的3個風險，請免費訪問我們的風險儀錶板。
債務對股本回報率的重要性
幾乎所有的公司都需要資金來投資於業務，以增加利潤。這些現金可以來自留存收益、發行新股(股權)或債務。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，增長所需的債務將提高回報，但不會影響股東權益。因此，債務的使用可以提高淨資產收益率，儘管打個比方說，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8.4%的股本回報率
四川僑源燃氣有限公司的債務權益比率僅為0.081，這是非常低的。我對它的淨資產收益率不太滿意，但債務水準並不太高，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。
摘要
股本回報率在比較不同企業的質量時很有用。一家能夠在沒有債務的情況下實現高股本回報率的公司可以被認為是一家高質量的企業。如果兩家公司的淨資產收益率相同，那麼我通常會傾向於債務較少的那一家。
但淨資產收益率只是一個更大的謎題的一部分，因為高質量企業的本益比往往很高。相對於股價反映的預期，利潤增長率是一個特別重要的考慮因素。通過查看過去收益、收入和現金流的可視化來檢查四川僑源天然氣有限公司過去的利潤增長情況。
當然了,如果你把目光投向別處，你可能會發現這是一筆很棒的投資。所以讓我們來看看這個免費有趣的公司名單。
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。
