Is the recent performance of Bortex Global Limited (HKG: 8118) stock driven by its attractive financial outlook?

Bortex Global (HKG: 8118) has had an excellent performance in the equity market with a significant 40% increase in its shares over the past week. Since the market typically pays for a company’s long-term fundamentals, we decided to study the company’s KPIs to see if they could influence the market. In this article, we have decided to focus on the ROE of Bortex Global.

ROE or return on equity is a useful tool to assess how effectively a company can generate the returns on investment it has received from its shareholders. 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 Bortex Global

How to calculate return on equity?

the formula for ROE is:

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

So, based on the above formula, Bortex Global’s ROE is:

16% = HK $ 27 million ÷ HK $ 166 million (based on the last twelve months to July 2021).

The “return” is the profit of the last twelve months. This means that for every HK $ 1 worth of equity, the company generated HK $ 0.16 in profit.

What is the relationship between ROE and profit growth?

So far, we’ve learned that ROE is a measure of a company’s profitability. 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 Bortex Global’s 16% profit growth and ROE

For starters, Bortex Global appears to have a respectable ROE. Even compared to the industry average of 14%, the company’s ROE looks quite correct. This probably partly explains Bortex Global’s moderate 17% growth over the past five years, among other factors.

As a next step, we compared Bortex Global’s net income growth with the industry and found that the company has a similar growth figure compared to the industry average growth rate of 16% over the same period. period.

SEHK: 8118 Past profit growth on December 13, 2021

The basis for attaching value to a business is, to a large extent, related to the growth of its profits. What investors next need to determine is whether the expected earnings growth, or lack thereof, is already built into the share price. By doing this, they will have an idea if the stock is heading for clear blue waters or if swampy waters are waiting for them. If you’re wondering about Bortex Global’s valuation, check out this gauge of its price / earnings ratio, relative to its industry.

Is Bortex Global Using Profits Effectively?

Since Bortex Global does not pay any dividends to its shareholders, we infer that the company has reinvested all of its profits to develop its business.

Summary

Overall, we are quite satisfied with the performance of Bortex Global. Specifically, we like the fact that the company is reinvesting a huge portion of its profits at a high rate of return. This of course enabled the company to experience substantial growth in profits. If the company continues to grow earnings like it has, it could have a positive impact on its stock price given the influence of earnings per share on long-term stock prices. It should be remembered that the results of stock prices also depend on the potential risks a company may face. It is therefore important that investors are aware of the risks inherent in the business. You can see the 2 risks we have identified for Bortex Global 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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