Zhejiang Entive Smart Kitchen Appliance (SZSE:300911) stock has increased by a significant 15% over the past week. Considering the company's impressive performance, we decided to take a closer look at its financial metrics, as a company's financial health over the long term usually drives market results. In particular, today we will pay attention to Zhejiang Entive Smart Kitchen Appliance's ROE.
ROE or return on equity is a useful tool for evaluating how effectively a company can generate returns on the investment it receives from its shareholders. Simply put, it is used to evaluate a company's profitability compared to its equity.
Check out our latest analysis for Zhejiang Entive Smart Kitchen Appliance.
How is ROE calculated?
ROE can be calculated using the following formula:
Return on equity = Net income (from continuing operations) ÷ Shareholders' equity
So, based on the above formula, Zhejiang Entive Smart Kitchen Appliance's ROE is:
15% = CA$224 million ÷ CA$1.5 billion (based on the trailing twelve months to September 2023).
“Return” refers to a company's earnings over the past year. Another way to think of it is that for every 1 CN worth of shares, the company allowed him to earn a profit of 0.15 CN.
What is the relationship between ROE and profit growth rate?
So far, we have learned that ROE is a measure of a company's profitability. We are then able to evaluate a company's future ability to generate profits based on how much of its profits it chooses to reinvest or “retain”. Assuming everything else remains constant, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily have these characteristics.
Zhejiang Entive Smart Kitchen Appliances Revenue Growth and ROE 15%
First, Zhejiang Entive Smart Kitchen Appliance's ROE looks acceptable. When compared to the industry average of his ROE of 11%, his ROE for the company looks quite remarkable. Perhaps as a result of this, Zhejiang Entive Smart Kitchen Appliance has been able to achieve an impressive net profit growth of 21% over the past five years. We think there may be other aspects that are positively impacting the company's earnings growth. For example, the company's management may have made some good strategic decisions, or the company may have a low dividend payout ratio.
We then compared Zhejiang Entive Smart Kitchen Appliance's net income growth rate with the industry. The same he found that the company's growth rate was high when compared to the industry where in five years he recorded a growth rate of 8.3%.
Earnings growth is an important metric to consider when evaluating a stock. The next thing investors need to determine is whether the expected earnings growth is already built into the stock price, or the lack thereof. Doing so will help you determine whether a stock's future is promising or ominous. How Much Is He 300911 Worth Today? The free research report's intrinsic value infographic will help you visualize whether 300911 is currently mispriced on the market.
Does Zhejiang Entive Smart Kitchen Appliance make good use of retained earnings?
Zhejiang Entive Smart Kitchen Appliance's median three-year dividend payout ratio is quite modest at 29%, which means the company retains 71% of its income. This suggests that the company's dividend is well covered, and given the high growth discussed above, Zhejiang Entive Smart Kitchen Appliance appears to be reinvesting its earnings efficiently .
Furthermore, Zhejiang Entive Smart Kitchen Appliance is determined to continue sharing its profits with its shareholders, as can be inferred from its long history of three years of dividend payments. Based on the latest analyst forecasts, the company's future payout ratio is expected to remain stable at 26% over the next three years. Therefore, the company's future ROE is not expected to change much, with analysts forecasting it to be 15%.
conclusion
Overall, we feel that the performance of Zhejiang Entive Smart Kitchen Appliance is very good. In particular, we like that the company is reinvesting heavily in its business and has a high rate of return. Unsurprisingly, this led to impressive profit growth. That said, the company's revenue growth is expected to slow, as predicted by current analyst forecasts. Learn more about the company's future revenue growth forecasts here. free Create a report on analyst forecasts to learn more about the company.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
