Declining Stock and Decent Financials: Is The Market Wrong About Xiangtan Electric Manufacturing Co. Ltd. (SHSE:600416)?
Declining Stock and Decent Financials: Is The Market Wrong About Xiangtan Electric Manufacturing Co. Ltd. (SHSE:600416)?
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity With its stock down 20% over the past three months, it is easy to disregard Xiangtan Electric Manufacturing (SHSE:600416). However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Specifically, we decided to study Xiangtan Electric Manufacturing's ROE in this article.
由於過去三個月股票下跌了20％，因此很容易忽略湘電股份（SHSE：600416）。然而，公司的基本面看起來相當不錯，長期財務與未來的市場價格走勢通常是一致的。具體而言，我們決定在本文中研究湘電股份的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.
淨資產收益率（roe）是衡量公司經營管理層如何有效利用公司資本的關鍵指標。換言之，它是一種利潤率，衡量由公司股東提供的資本的回報率。
How To Calculate Return On Equity?
如何計算股東權益報酬率？
Return on equity can be calculated by using the formula:
股東權益報酬率可以使用以下公式計算：
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
淨資產收益率 = 淨利潤（從持續經營中獲得）÷ 股東權益
So, based on the above formula, the ROE for Xiangtan Electric Manufacturing is:
因此，根據上述公式，湘電股份的ROE爲：
3.6% = CN¥260m ÷ CN¥7.3b (Based on the trailing twelve months to March 2024).
3.6％ = CN¥26000萬 ÷ CN¥73億（截至2024年3月的過去十二個月）。
The 'return' is the amount earned after tax over the last twelve months. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.04.
「回報率」是過去十二個月稅後收益。這意味着，對於每個股東投資的人民幣1元，公司產生了人民幣0.04元的利潤。
What Is The Relationship Between ROE And Earnings Growth?
ROE與盈利增長之間的關係是什麼？
We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.
我們已經確定，ROE是一個公司未來盈利的高效測量工具。基於公司選擇重新投資或「保留」多少利潤，我們可以評估公司未來產生利潤的能力。假設其他條件相同，具有更高股本回報率和更高利潤保留比的公司通常增長速度較高，而沒有相同特徵的公司則通常增長速度較低。
A Side By Side comparison of Xiangtan Electric Manufacturing's Earnings Growth And 3.6% ROE
Given that Xiangtan Electric Manufacturing doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.
As you can see, Xiangtan Electric Manufacturing's ROE looks pretty weak. Not just that, even compared to the industry average of 6.9%, the company's ROE is entirely unremarkable. In spite of this, Xiangtan Electric Manufacturing was able to grow its net income considerably, at a rate of 77% in the last five years. We reckon that there could be other factors at play here. Such as - high earnings retention or an efficient management in place.
如您所見，湘電股份的roe看起來相當薄弱。不僅如此，即使與行業平均水平6.9％相比，公司的ROE也完全沒有什麼亮點。儘管如此，湘電股份能夠以每年77％的速度大幅增長淨利潤。我們認爲這裏可能存在其他因素。例如，高收益率或高效管理等。
Next, on comparing with the industry net income growth, we found that Xiangtan Electric Manufacturing's growth is quite high when compared to the industry average growth of 12% in the same period, which is great to see.
Conclusion
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Xiangtan Electric Manufacturing is trading on a high P/E or a low P/E, relative to its industry.
Is Xiangtan Electric Manufacturing Making Efficient Use Of Its Profits?
湘電股份是否有效利用其利潤？
Given that Xiangtan Electric Manufacturing doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.
考慮到湘電股份不向其股東支付任何正常股息，我們推斷該公司一直在將其所有利潤重新投資以發展業務。
Conclusion
結論
In total, it does look like Xiangtan Electric Manufacturing has some positive aspects to its business. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth.
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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.
對本文有任何反饋？對內容有任何疑慮？請直接與我們聯繫。或者，發送電子郵件至editorial-team@simplywallst.com。
這篇文章是Simply Wall St的一般性文章。我們根據歷史數據和分析師預測提供評論，只使用公正的方法論，我們的文章並不意味着提供任何金融建議。文章不構成買賣任何股票的建議，也不考慮您的目標或您的財務狀況。我們的目標是帶給您基本數據驅動的長期關注分析。請注意，我們的分析可能不考慮最新的價格敏感公司公告或定性材料。Simply Wall St沒有任何股票頭寸。
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
對本文有任何反饋？對內容有任何疑慮？請直接與我們聯繫。或者，發送電子郵件至editorial-team@simplywallst.com。