With its stock down 11% over the past three months, it is easy to disregard Hoyuan Green Energy (SHSE:603185). However, a closer look at its sound financials might cause you to think again. Given that fundamentals usually drive long-term market outcomes, the company is worth looking at. In this article, we decided to focus on Hoyuan Green Energy's ROE.
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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
Check out our latest analysis for Hoyuan Green Energy
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 Hoyuan Green Energy is:
12% = CN¥1.5b ÷ CN¥13b (Based on the trailing twelve months to September 2023).
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¥0.12 in profit.
What Is The Relationship Between ROE And Earnings Growth?
Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.
Hoyuan Green Energy's Earnings Growth And 12% ROE
To start with, Hoyuan Green Energy's ROE looks acceptable. On comparing with the average industry ROE of 6.1% the company's ROE looks pretty remarkable. Probably as a result of this, Hoyuan Green Energy was able to see an impressive net income growth of 51% over the last five years. However, there could also be other causes behind this growth. Such as - high earnings retention or an efficient management in place.
As a next step, we compared Hoyuan Green Energy's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 27%.
SHSE:603185 Past Earnings Growth November 24th 2023
Earnings growth is a huge factor in stock valuation. It's important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Hoyuan Green Energy fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Hoyuan Green Energy Using Its Retained Earnings Effectively?
Hoyuan Green Energy's three-year median payout ratio is a pretty moderate 25%, meaning the company retains 75% of its income. This suggests that its dividend is well covered, and given the high growth we discussed above, it looks like Hoyuan Green Energy is reinvesting its earnings efficiently.
Moreover, Hoyuan Green Energy is determined to keep sharing its profits with shareholders which we infer from its long history of four years of paying a dividend.
Summary
On the whole, we feel that Hoyuan Green Energy's performance has been quite good. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. We also studied the latest analyst forecasts and found that the company's earnings growth is expected be similar to its current growth rate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.
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.
首先,Hoyuan Green Energy的投資回報率似乎可以接受。與6.1%的行業平均投資回報率相比,該公司的投資回報率看起來相當可觀。可能正因爲如此,Hoyuan Green Energy得以在過去五年中實現了令人印象深刻的51%的淨收入增長。但是,這種增長背後可能還有其他原因。例如——高收益留存率或實行高效管理。
下一步,我們將Hoyuan Green Energy的淨收入增長與該行業進行了比較,令人高興的是,我們發現該公司的增長高於27%的行業平均增長。
上海證券交易所:603185 過去的收益增長 2023 年 11 月 24 日
收益增長是股票估值的重要因素。對於投資者來說,重要的是要知道市場是否影響了公司的預期收益增長(或下降)。通過這樣做,他們將知道這隻股票是進入清澈的藍色海水還是沼澤水域在等着你。與其他公司相比,Hoyuan Green Energy的估值是否公平?這三種估值指標可能有助於您做出決定。
Hoyuan Green Energy能否有效使用其留存收益?
Hoyuan Green Energy的三年中位支付率爲25%,這意味着該公司保留了收入的75%。這表明其股息已得到充分保障,鑑於我們上面討論的高增長,Hoyuan Green Energy似乎正在有效地對其收益進行再投資。
此外,Hoyuan Green Energy決心繼續與股東分享利潤,這是我們從其支付股息的四年悠久歷史中推斷出來的。