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.
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。我們將使用淨資產收益率來考察深圳海王星生物工程有限公司(深圳證券交易所：000078)，作為一個實例。
股本回報率(ROE)是用來評估公司管理層利用公司資本效率的關鍵指標。簡而言之，淨資產收益率顯示了每一美元相對於其股東投資產生的利潤。
查看我們對深圳海王星生物工程的最新分析
如何計算股本回報率？
股本回報率可使用以下公式計算：
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，深圳海王星生物工程的淨資產收益率為：
1.7%=1.24億元×74億元(以截至2022年9月的12個月為基礎)。
“回報”指的是一家公司過去一年的收益。另一種説法是，公司每持有價值1元的股權，就能賺取0.02元的利潤。
深圳海王星生物工程的淨資產收益率高嗎？
通過將一家公司的淨資產收益率(ROE)與其行業平均水平進行比較，我們可以快速衡量它有多好。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。如果你看下圖，你可以看到深圳海王星生物工程的淨資產收益率低於醫療行業分類的平均水平(9.8%)。
深圳證券交易所：000078股本回報率2022年12月26日
這當然不是理想的情況。然而，較低的淨資產收益率並不總是壞事。如果公司的債務水平處於中低水平，那麼仍有機會通過使用財務槓桿來提高回報。考慮到涉及的風險，高債務水平和低ROE的公司是我們希望避免的組合。您可以通過訪問我們的風險控制面板在我們的平臺上是免費的。
債務對淨資產收益率有何影響？
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。在第一種和第二種選擇的情況下，淨資產收益率將反映現金用於增長的這種情況。在後一種情況下，債務的使用將提高回報，但不會改變股權。在這種情況下，債務的使用將提高淨資產收益率，即使企業的核心經濟保持不變。
深圳海王星生物工程的債務及其1.7%的淨資產收益率
值得注意的是，深圳海王星生物工程高度利用債務，導致其債務權益比為1.57。由於淨資產收益率(ROE)相當低，而且大量使用債務，目前很難對這項業務感到興奮。債務增加了風險，減少了公司未來的選擇，所以你通常希望看到使用它的一些良好回報。
結論
股本回報率是我們比較不同公司業務質量的一種方式。能夠在沒有太多債務的情況下實現高股本回報率的公司通常質量良好。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。
但當一項業務是高質量的時，市場往往會將其抬高到反映這一點的價格。相對於當前價格反映的利潤增長預期，也必須考慮利潤可能增長的速度。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。
當然了深圳海王星生物工程可能不是買入的最佳股票。所以你可能想看看這個免費其他擁有高ROE和低債務的公司的集合。
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。
