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. To keep the lesson grounded in practicality, we'll use ROE to better understand Shanghai Shibei Hi-Tech Co.,Ltd. (SHSE:600604).
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.
View our latest analysis for Shanghai Shibei Hi-TechLtd
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 Shanghai Shibei Hi-TechLtd is:
2.6% = CN¥218m ÷ CN¥8.4b (Based on the trailing twelve months to June 2022).
The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each CN¥1 of shareholders' capital it has, the company made CN¥0.03 in profit.
Does Shanghai Shibei Hi-TechLtd Have A Good ROE?
Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. As is clear from the image below, Shanghai Shibei Hi-TechLtd has a lower ROE than the average (4.8%) in the Real Estate industry.
![roe](https://usnewsfile.moomoo.com/pic/0-14790211-0-c4c215f9b240b1f017f7583392da38a5.png/big)
SHSE:600604 Return on Equity September 16th 2022
Unfortunately, that's sub-optimal. That being said, a low ROE is not always a bad thing, especially if the company has low leverage as this still leaves room for improvement if the company were to take on more debt. A high debt company having a low ROE is a different story altogether and a risky investment in our books. You can see the 3 risks we have identified for Shanghai Shibei Hi-TechLtd by visiting our risks dashboard for free on our platform here.
How Does Debt Impact Return On Equity?
Virtually all companies need money to invest in the business, to grow profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. 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. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.
Shanghai Shibei Hi-TechLtd's Debt And Its 2.6% ROE
Shanghai Shibei Hi-TechLtd clearly uses a high amount of debt to boost returns, as it has a debt to equity ratio of 1.18. With a fairly low ROE, and significant use of debt, it's hard to get excited about this business at the moment. Investors should think carefully about how a company might perform if it was unable to borrow so easily, because credit markets do change over time.
Conclusion
Return on equity is useful for comparing the quality of different businesses. Companies that can achieve high returns on equity without too much debt are generally of good quality. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE.
Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. So I think it may be worth checking this free this detailed graph of past earnings, revenue and cash flow.
Of course Shanghai Shibei Hi-TechLtd 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.
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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.
雖然一些投資者已經非常精通財務指標(帽子提示),但本文面向的是那些想要了解股本回報率(ROE)及其重要性的人。為了讓這一課立足於實踐,我們將使用淨資產收益率來更好地瞭解上海世貝高科技有限公司(上海證券交易所代碼:600604)。
股本回報率或淨資產收益率是股東要考慮的一個重要因素,因為它告訴他們他們的資本再投資的效率。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。
查看我們對上海世貝高科技有限公司的最新分析
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,上海市北高科股份有限公司的淨資產收益率為:
2.6%=CN元2.18億×CN元8.4億(以截至2022年6月的12個月為基礎)。
“報税表”是過去12個月的税後收入。一種概念化的方法是,公司每擁有1元人民幣的股東資本,就會獲得0.03元人民幣的利潤。
上海世貝高科技有限公司的淨資產收益率高嗎?
可以説,評估公司淨資產收益率最簡單的方法是將其與所在行業的平均水平進行比較。然而,這種方法只是作為一種粗略的檢查,因為在同一行業分類中,公司確實有很大的不同。從下圖可以明顯看出,上海世貝高科技有限公司的淨資產收益率(ROE)低於房地產行業的平均水平(4.8%)。
![roe](https://usnewsfile.moomoo.com/pic/0-14790211-0-c4c215f9b240b1f017f7583392da38a5.png/big)
上證所:2022年9月16日股本回報率600604
不幸的是,這並不是最優的。話雖如此,低ROE並不總是一件壞事,特別是如果公司的槓桿率較低,因為如果公司承擔更多債務,這仍有改進的空間。一家高負債、淨資產收益率低的公司則完全是另一回事,在我們的賬面上是一種高風險的投資。您可以通過訪問我們的網站查看我們為上海世貝高科技有限公司確定的3個風險風險控制面板在我們的平臺上是免費的。
債務對股本回報率有何影響?
幾乎所有的公司都需要資金來投資於業務,以增加利潤。投資的現金可以來自上一年的利潤(留存收益)、發行新股或借款。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。因此,債務的使用可以提高淨資產收益率,儘管打個比方説,在暴風雨天氣的情況下會有額外的風險。
上海世貝高科技有限公司的債務及其2.6%的淨資產收益率
上海市北高科技有限公司顯然使用了大量的債務來提高回報,因為它的債務與股本比率為1.18。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。投資者應該仔細考慮,如果一家公司不能如此輕鬆地借款,它可能會表現如何,因為信貸市場確實會隨着時間的推移而變化。
結論
股本回報率在比較不同企業的質量時很有用。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。如果兩家公司的債務權益比大致相同,而其中一家公司的淨資產收益率更高,我通常會更喜歡淨資產收益率更高的那家公司。
話雖如此,雖然淨資產收益率是衡量業務質量的有用指標,但你必須考慮一系列因素,才能確定購買股票的合適價格。重要的是要考慮其他因素,比如未來的利潤增長,以及未來需要多少投資。所以我覺得這可能值得一查免費這詳細圖表過去的收益、收入和現金流。
當然了上海市北高科股份有限公司可能不是最好的股票。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。
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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。