Beijing Tong Ren Tang Chinese Medicine (HKG:3613) has had a great run in the stock market, with its shares jumping 7.3% last week. As most of us know, fundamentals are usually what guide market price movements over the long term, so look at today’s company’s key financial metrics to see if they play some role in recent price movements. I decided to judge whether it fulfilled. Chinese herbal medicine of Beijing Tongren Tang ROE today.
ROE or Return on Equity is a useful tool for evaluating how effectively a company is able to generate returns on the investment it receives from its shareholders. Simply put, it is used to assess a company’s profitability in relation to its equity capital.
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How do you calculate return on equity?
of Formula for Return on Equity teeth:
Return on Equity = Net Income (from Continuing Operations) ÷ Shareholders’ Equity
Therefore, based on the above formula, Beijing Dojinto Kampo Yaku’s ROE is:
17% = HK$599 million ÷ HK$3.5 billion (based on the last 12 months to June 2022).
“Return” refers to the company’s earnings for the last year. One way he conceptualizes this is that for every HKD 1 in shareholders’ equity, the company made a profit of HKD 0.17 for him.
Why ROE Is Important to Profit Growth
So far we have learned that ROE is a measure of a company’s profitability. Next, the company should assess how much of its earnings will be reinvested or “retained” for future growth. This will give you an idea about the company’s growth potential. Generally speaking, other things being equal, companies with high return on equity and earnings retention will have higher growth rates than companies that do not share these attributes.
Beijing Dojindo’s Herbal Medicine Revenue Growth And ROE Is 17%.
First of all, Beijing Tongren’s ROE looks acceptable. His ROE for the company is quite impressive, especially when compared to the industry average of 10%. But for some reason, the higher returns aren’t reflected in Beijing Tongren Tang Herbal Medicine’s average five-year net profit growth of just 2.7%. It’s a little surprising from a company that boasts such high profitability. Such a scenario can occur when a company pays out a large portion of its earnings in dividends or faces competitive pressure.
Next, when compared to the industry’s net profit growth, we find that Beijing Tongren Tang Herbal Medicine’s reported growth rate is lower than the industry’s growth rate of 8.8% over the same period.
Earnings growth is an important metric to consider when evaluating stocks. The next thing investors need to determine is whether expected earnings growth, or lack thereof, is already baked into the stock price. This helps determine whether the stock is positioned for a bright future or a dark future.Click here if you are interested in the evaluation of Beijing Dojindo’s herbal medicine This price/earnings ratio gaugecompared to its industry.
Does Beijing Dojindo’s herbal medicine make effective use of internal reserves?
Despite a medium three-year median payout ratio of 37% (meaning the company retains the remaining 63% of its income), Beijing Dojindo Kampo Pharmaceutical’s earnings growth is was very low. So there may be another explanation for that point. For example, your company may be doing poorly.
In addition, Beijing Tongren Tang Herbal Medicine has paid dividends for nine years, which is a considerable period of time, and management must have realized that shareholders prefer dividends to earnings growth.
Overview
Overall, I feel that Beijing Tongrendang’s herbal medicines certainly have some positive factors to consider. is a pity. We believe there are several external factors that can adversely affect our business. As such, the latest analyst forecasts show that the company’s earnings will continue to grow.Learn more about the company’s future revenue growth projections here freedom For more information, see the company’s analyst forecasts report.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …
