One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. By way of learning-by-doing, we'll look at ROE to gain a better understanding of Chongqing Shunbo Aluminum Co.,Ltd. (SZSE:002996).
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. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
See our latest analysis for Chongqing Shunbo AluminumLtd
How To Calculate Return On Equity?
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 Chongqing Shunbo AluminumLtd is:
17% = CN¥428m ÷ CN¥2.5b (Based on the trailing twelve months to June 2022).
The 'return' is the yearly profit. That means that for every CN¥1 worth of shareholders' equity, the company generated CN¥0.17 in profit.
Does Chongqing Shunbo AluminumLtd Have A Good ROE?
By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. Pleasingly, Chongqing Shunbo AluminumLtd has a superior ROE than the average (8.9%) in the Metals and Mining industry.
SZSE:002996 Return on Equity October 21st 2022
That is a good sign. Bear in mind, a high ROE doesn't always mean superior financial performance. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. To know the 4 risks we have identified for Chongqing Shunbo AluminumLtd visit our risks dashboard for free.
How Does Debt Impact Return On Equity?
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 case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. That will make the ROE look better than if no debt was used.
Chongqing Shunbo AluminumLtd's Debt And Its 17% ROE
It's worth noting the high use of debt by Chongqing Shunbo AluminumLtd, leading to its debt to equity ratio of 1.08. While its ROE is pretty respectable, the amount of debt the company is carrying currently is not ideal. Debt does bring extra risk, so it's only really worthwhile when a company generates some decent returns from it.
Summary
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.
But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. So you might want to take a peek at this data-rich interactive graph of forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
我们能做的最好的投资之一就是我们自己的知识和技能。考虑到这一点，本文将讨论如何使用股本回报率(ROE)来更好地了解企业。通过边做边学的方式，我们将看到净资产收益率，以更好地了解重庆顺博铝业有限公司(SZSE：002996)。
净资产收益率，即股本回报率，是评估一家公司从股东那里获得投资回报的有效程度的有用工具。换句话说，这是一个衡量公司股东提供的资本回报率的盈利比率。
查看我们对重庆顺博铝业有限公司的最新分析
如何计算股本回报率？
可使用以下公式计算净资产收益率：
股本回报率=(持续经营的)净利润？股东权益
因此，根据上述公式，重庆顺博铝业股份有限公司的净资产收益率为：
17%=CN元4.28亿×CN元25亿元(基于截至2022年6月的12个月)。
“回报”就是年度利润。这意味着，每增加价值1元的股东权益，公司就会产生0.17元的利润。
重庆顺博铝业的净资产收益率好吗？
通过将一家公司的净资产收益率(ROE)与其行业平均水平进行比较，我们可以快速衡量它有多好。然而，这种方法只是作为一种粗略的检查，因为在同一行业分类中，公司确实有很大的不同。令人欣慰的是，重庆顺博铝业股份有限公司的净资产收益率(ROE)高于金属和矿业行业的平均水平(8.9%)。
深圳证券交易所：002996股本回报率2022年10月21日
这是一个好兆头。请记住，高净资产收益率并不总是意味着更好的财务表现。除了净利润的变化外，高净资产收益率也可能是高负债相对于股本的结果，这表明存在风险。要了解我们为重庆顺博铝业有限公司确定的4个风险，请免费访问我们的风险仪表板。
债务对股本回报率有何影响？
公司通常需要投入资金来增加利润。这些现金可以来自留存收益、发行新股(股权)或债务。在第一种和第二种选择的情况下，净资产收益率将反映现金用于增长的这种情况。在后一种情况下，增长所需的债务将提高回报，但不会影响股东权益。这将使净资产收益率看起来比不使用债务的情况下更好。
重庆顺博铝业有限公司的债务及其17%的净资产收益率
值得注意的是，重庆顺博铝业有限公司高度利用债务，导致其债务权益比率为1.08。虽然其净资产收益率相当可观，但该公司目前背负的债务规模并不理想。债务确实会带来额外的风险，所以只有当一家公司从债务中获得一些可观的回报时，它才是真正值得的。
摘要
股本回报率在比较不同企业的质量时很有用。在我们的账目中，最高质量的公司拥有高股本回报率，尽管债务水平较低。在其他条件相同的情况下，净资产收益率越高越好。
但净资产收益率只是一个更大的谜题的一部分，因为高质量企业的市盈率往往很高。相对于当前价格反映的利润增长预期，也必须考虑利润可能增长的速度。因此，你可能想看看这张数据丰富的公司预测互动图表。
当然了,如果你把目光投向别处，你可能会发现这是一笔很棒的投资。所以让我们来看看这个免费有趣的公司名单。
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本文由Simply Wall St.撰写，具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论，我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议，也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意，我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。
