Academy of Environmental Planning and DesignLtd. Nanjing University's (SZSE:300864) stock is up by a considerable 19% over the past week. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. Particularly, we will be paying attention to Academy of Environmental Planning and DesignLtd. Nanjing University's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

How Do You Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Academy of Environmental Planning and DesignLtd. Nanjing University is:

14% = CN¥172m ÷ CN¥1.3b (Based on the trailing twelve months to June 2024).

The 'return' refers to a company's earnings over the last year. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.14.

What Has ROE Got To Do With 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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Academy of Environmental Planning and DesignLtd. Nanjing University's Earnings Growth And 14% ROE

At first glance, Academy of Environmental Planning and DesignLtd. Nanjing University seems to have a decent ROE. On comparing with the average industry ROE of 5.9% the company's ROE looks pretty remarkable. Probably as a result of this, Academy of Environmental Planning and DesignLtd. Nanjing University was able to see a decent growth of 6.9% over the last five years.

As a next step, we compared Academy of Environmental Planning and DesignLtd. Nanjing University's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 3.8%.

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. If you're wondering about Academy of Environmental Planning and DesignLtd. Nanjing University's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Academy of Environmental Planning and DesignLtd. Nanjing University Efficiently Re-investing Its Profits?

Academy of Environmental Planning and DesignLtd. Nanjing University has a significant three-year median payout ratio of 69%, meaning that it is left with only 31% to reinvest into its business. This implies that the company has been able to achieve decent earnings growth despite returning most of its profits to shareholders.

Besides, Academy of Environmental Planning and DesignLtd. Nanjing University has been paying dividends over a period of three years. This shows that the company is committed to sharing profits with its shareholders.

Conclusion

On the whole, we feel that Academy of Environmental Planning and DesignLtd. Nanjing University's performance has been quite good. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. So far, we've only made a quick discussion around the company's earnings growth. You can do your own research on Academy of Environmental Planning and DesignLtd. Nanjing University and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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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.