Yantai North Andre Juice Company Limited (HKG: 2218) Shares On A Bullish Trend: Could Fundamentals Be Driving The Momentum?


Yantai North Andre Juice (HKG: 2218) has had an excellent performance in the equity market with its shares increasing significantly by 18% in the past three months. As most know, fundamentals generally guide long-term market price movements, so we decided to look at the company’s key financial metrics today to see if they have a role to play in the recent one. price movement. In particular, we’ll be paying special attention to Yantai North Andre Juice’s ROE today.

Return on equity or ROE is a key metric used to assess the efficiency with which the management of a business is using business capital. In other words, it is a profitability ratio that measures the rate of return on capital contributed by the shareholders of the company.

Check out our latest review for Yantai North Andre juice

How is the ROE calculated?

ROE can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

So, based on the above formula, the ROE of Yantai North Andre juice is:

6.1% = CN ¥ 131m ÷ CN ¥ 2.2b (Based on the last twelve months up to September 2021).

“Return” refers to a company’s profits over the past year. One way to conceptualize this is that for every HK $ 1 of shareholder capital it has, the company has made HK $ 0.06 in profit.

What is the relationship between ROE and profit growth?

We have already established that ROE is an effective indicator of profit generation for a company’s future profits. Based on how much of those profits the company reinvests or “withholds” and its efficiency, we are then able to assess a company’s profit growth potential. Generally speaking, all other things being equal, companies with high return on equity and high profit retention have a higher growth rate than companies that do not share these attributes.

A Side-by-Side Comparison of Yantai North Andre Juice’s 6.1% Profit Growth and ROE

At first glance, Yantai North Andre Juice’s ROE isn’t much to say. Then, compared to the industry average ROE of 11%, the company’s ROE leaves us even less enthusiastic. However, we can see that Yantai North Andre Juice has seen modest net income growth of 7.7% over the past five years. Thus, the growth in the company’s profits could probably have been caused by other variables. Such as – high profit retention or effective management in place.

Then, comparing with the industry’s net income growth, we found that the reported growth of Yantai North Andre Juice was less than the industry’s growth by 10% during the same period, which we do not believe. do not like to see.

SEHK: 2218 Past profit growth on December 10, 2021

Profit growth is an important metric to consider when valuing a stock. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. This then helps him determine whether the stock is set for a bright or dark future. A good indicator of expected earnings growth is the P / E ratio which determines the price the market is willing to pay for a stock based on its earnings outlook. So, you might want to check if Yantai North Andre Juice is trading high P / E or low P / E, relative to its industry.

Is Yantai North Andre Juice Efficiently Reinvesting Profits?

Yantai North Andre Juice’s three-year median payout ratio to shareholders is 24% (implying that it keeps 76% of its revenue), which is lower, so it looks like management is reinvesting the profits massively to develop its activity.

In addition, Yantai North Andre Juice is committed to continuing to share its profits with its shareholders, which we can deduce from its long history of paying dividends for at least ten years.

Summary

All in all, it seems that Yantai North Andre Juice has some positive aspects for his business. Specifically, its fairly high profit growth figure, which was undoubtedly supported by the company’s high profit retention. Nonetheless, the low ROE means that not all of that reinvestment is of much benefit to investors. While we don’t completely reject the business, what we would do is try to determine how risky the business is in order to make a more informed decision about the business. You can see the 1 risk that we have identified for Yantai North Andre juice by visiting our risk dashboard for free on our platform here.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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