A Note On Essential Utilities, Inc.'s (NYSE:WTRG) ROE and Debt To Equity
A Note On Essential Utilities, Inc.'s (NYSE:WTRG) ROE and Debt To Equity
While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to examine Essential Utilities, Inc. (NYSE:WTRG), by way of a worked example.
雖然一些投資者已經對財務指標非常熟悉(感謝提示),但這篇文章是爲那些希望了解淨資產收益率(roe)及其重要性的人而寫的。我們將通過一個實例來使用roe來考察essential utilities公司(紐交所:WTRG)。
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.
股本回報率或roe是一項關鍵指標,用於評估公司管理層使用公司資本的效率。換句話說,它揭示了公司將股東的投資轉化爲利潤的成功。
How To Calculate Return On Equity?
如何計算股東權益報酬率?
The formula for ROE is:
roe的公式是:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
淨資產收益率 = 淨利潤(來自持續經營) ÷ 股東權益
So, based on the above formula, the ROE for Essential Utilities is:
因此,根據上述公式,Essential Utilities的ROE爲:
8.8% = US$546m ÷ US$6.2b (Based on the trailing twelve months to September 2024).
8.8% = US$54600萬 ÷ US$62億(基於截至2024年9月的過去十二個月)。
The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.09 in profit.
「回報」指的是公司過去一年的收益。另一種思考方式是,對於每1美元的淨資產,公司能夠賺取0.09美元的利潤。
Does Essential Utilities Have A Good ROE?
essential utilities的roe好嗎?
One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. The image below shows that Essential Utilities has an ROE that is roughly in line with the Water Utilities industry average (9.3%).
判斷一個公司是否有良好的淨資產收益率的一個簡單方法是將其與行業的平均水平進行比較。這種方法的侷限性在於,即使在同一行業分類中,一些公司的情況也與其他公司相差甚遠。下面的圖像顯示,essential utilities的roe大致與公用股行業平均水平(9.3%)相符。
That's neither particularly good, nor bad. 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 true, then it is more an indication of risk than the potential. You can see the 3 risks we have identified for Essential Utilities by visiting our risks dashboard for free on our platform here.
這既不特別好,也不壞。雖然roe至少沒有低於行業水平,但仍值得檢查公司的債務所起的作用,因爲相對於股本的高債務水平也可能使roe看起來很高。如果這種情況屬實,那麼它更多的是風險的指示而不是潛力的指示。您可以通過訪問我們的風險特斯拉-儀表免費查看我們爲essential utilities識別的三個風險。
How Does Debt Impact ROE?
債務對ROE的影響是怎樣的?
Companies usually need to invest money to grow their profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same.
企業通常需要投資資金來增加其利潤。這筆資金可以來自留存收益、發行新股(股本)或債務。在前兩種情況下,roe將捕捉到這種用於增長的資本。在後一種情況下,用於增長的債務將提高回報,但不會影響總股本。通過這種方式,即使企業的核心經濟學保持不變,使用債務也會提高roe。
Essential Utilities' Debt And Its 8.8% ROE
essential utilities的債務及其8.8%的roe
Essential Utilities does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.20. Its ROE is quite low, even with the use of significant debt; that's not a good result, in our opinion. Debt does bring extra risk, so it's only really worthwhile when a company generates some decent returns from it.
essential utilities確實使用大量債務來增加回報。它的債務與股本比率爲1.20。儘管使用了大量債務,它的roe仍然很低;在我們看來,這不是一個好結果。債務確實帶來了額外的風險,因此只有在公司從中產生相當不錯的回報時,這才是值得的。
Conclusion
結論
Return on equity is useful for comparing the quality of different businesses. In our books, the highest quality companies have high return on equity, despite low debt. All else being equal, a higher ROE is better.
ROE可用於比較不同企業的質量。在我們看來,高ROE且負債率較低的公司是最優質的公司。其他條件相等的情況下,較高的ROE更好。
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. So you might want to take a peek at this data-rich interactive graph of forecasts for the company.
但roe只是更大謎題中的一部分,因爲高質量企業通常以高倍數的收益率交易。利潤增長率與股票價格所體現的預期相比,是一個特別重要的考慮因素。因此,您可能想要查看這個數據豐富的互動預測圖表。
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.
如果您想查看另一家可能具有更好財務狀況的公司 - 具有高股本回報率和低債務的公司,那麼請不要錯過這份有趣公司列表,該列表免費提供。
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.
對這篇文章有反饋嗎?對內容感到擔憂嗎?請直接與我們聯繫。或者,發送電子郵件至editorial-team @ simplywallst.com。
Simply Wall St的這篇文章是一般性質的。我們僅基於歷史數據和分析師預測提供評論,使用公正的方法,我們的文章並非意在提供財務建議。這並不構成買入或賣出任何股票的建議,並且不考慮您的目標或財務狀況。我們旨在爲您帶來基於基礎數據驅動的長期聚焦分析。請注意,我們的分析可能未考慮最新的價格敏感公司公告或定性材料。Simply Wall St對提及的任何股票都沒有持倉。