Citic Pacific Special Steel Group's (SZSE:000708) stock is up by 6.5% over the past three months. As most would know, long-term fundamentals have a strong correlation with market price movements, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. In this article, we decided to focus on Citic Pacific Special Steel Group's ROE.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Put another way, it reveals the company's success at turning shareholder investments into profits.
How Is ROE Calculated?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Citic Pacific Special Steel Group is:
14% = CN¥5.8b ÷ CN¥43b (Based on the trailing twelve months to March 2024).
The 'return' is the profit over the last twelve months. That means that for every CN¥1 worth of shareholders' equity, the company generated CN¥0.14 in profit.
What Is The Relationship Between ROE And Earnings Growth?
We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company's earnings growth potential. 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.
Citic Pacific Special Steel Group's Earnings Growth And 14% ROE
To begin with, Citic Pacific Special Steel Group seems to have a respectable ROE. Especially when compared to the industry average of 7.4% the company's ROE looks pretty impressive. Despite this, Citic Pacific Special Steel Group's five year net income growth was quite low averaging at only 5.0%. That's a bit unexpected from a company which has such a high rate of return. Such a scenario is likely to take place when a company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.
As a next step, we compared Citic Pacific Special Steel Group's net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 12% in the same period.
SZSE:000708 Past Earnings Growth May 28th 2024
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). Doing so will help them establish if the stock's future looks promising or ominous. What is 000708 worth today? The intrinsic value infographic in our free research report helps visualize whether 000708 is currently mispriced by the market.
Is Citic Pacific Special Steel Group Efficiently Re-investing Its Profits?
With a high three-year median payout ratio of 52% (or a retention ratio of 48%), most of Citic Pacific Special Steel Group's profits are being paid to shareholders. This definitely contributes to the low earnings growth seen by the company.
Additionally, Citic Pacific Special Steel Group has paid dividends over a period of at least ten years, which means that the company's management is determined to pay dividends even if it means little to no earnings growth. Our latest analyst data shows that the future payout ratio of the company is expected to rise to 67% over the next three years. Regardless, the ROE is not expected to change much for the company despite the higher expected payout ratio.
Summary
Overall, we feel that Citic Pacific Special Steel Group certainly does have some positive factors to consider. Although, we are disappointed to see a lack of growth in earnings even in spite of a high ROE. Bear in mind, the company reinvests a small portion of its profits, which means that investors aren't reaping the benefits of the high rate of return. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. 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.
Citic Pacific Special Steel Group(SZSE:000708)の株価は過去3か月で6.5%上昇しています。多くの人が知っているように、長期的な基本的な要因と市場価格の動きには強い相関関係があるため、私たちは今日、同社の主要な財務指標を分析して、最近の株価の動きに役割を果たすものがあるかどうかを判断することにしました。この記事では、私たちはCitic Pacific Special Steel GroupのROEに焦点を当てることにしました。
まず、Citic Pacific Special Steel GroupのROEは、かなり高いと言えます。特に、業界平均7.4%と比較すると、非常に印象的です。ただし、Citic Pacific Special Steel Groupの5年間の当期純利益成長率は平均5.0%と低い結果でした。これは、企業が配当として多くの利益を支払った場合や競争圧力があった場合に発生することがあります。
次に、Citic Pacific Special Steel Groupの当期純利益成長率を業界平均と比較したところ、同期間の業界平均成長率12%より低いことがわかりました。
Citic Pacific Special Steel Groupは、利益をうまく再投資しているのでしょうか?
Citic Pacific Special Steel Groupの過去3年間の平均配当率は52%で、利益の大部分は株主に支払われています。これは、業績の低迷につながっています。
さらに、Citic Pacific Special Steel Groupは、少なくとも10年間配当を支払っているため、企業の経営陣は業績の低迷にもかかわらず配当を支払うことを決意しています。最新のアナリストデータによると、同社の将来の配当率は、今後3年で67%に上昇することが予想されています。それにもかかわらず、利益率は高くとも、ROEはほとんど変わらないと予想されています。
要約
全体的に、Citic Pacific Special Steel Groupには十分なプラスの要因があると考えます。ROEが高いにもかかわらず、利益の成長が欠けていることには失望しています。ただし、企業の利益の一部しか再投資していないため、高い利益率の恩恵を受けることができません。そうは言っても、現在のアナリスト予測を見ると、企業の利益は勢いを増していることがわかります。これらのアナリスト予測は、業界全体の期待に基づいているのか、企業の基本的な条件に基づいているのか。ここをクリックして、同社のアナリスト予測ページに移動してください。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。