Jinchuan Group International Resources Co. Ltd (HKG:2362) shares fell, but fundamentals look solid: is the market wrong?
With its stock down 40% in the past three months, it’s easy to overlook Jinchuan Group International Resources (HKG: 2362). However, a closer look at his sound finances might make you think again. Since fundamentals generally determine long-term market outcomes, the company is worth looking into. In particular, we will pay attention to the ROE of Jinchuan Group International Resources today.
Return on equity or ROE is a key metric used to gauge how effectively a company’s management is using the company’s capital. In other words, it is a profitability ratio that measures the rate of return on capital contributed by the company’s shareholders.
Check out our latest analysis for Jinchuan Group International Resources
How is ROE calculated?
The ROE formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE for Jinchuan Group International Resources is:
14% = $162 million ÷ $1.2 billion (based on trailing 12 months to December 2021).
“Yield” is the income the business has earned over the past year. This means that for every HK$1 of equity, the company generated HK$0.14 of profit.
What does ROE have to do with earnings growth?
We have already established that ROE serves as an effective profit-generating indicator for a company’s future earnings. Depending on how much of those earnings the company reinvests or “keeps”, and how efficiently it does so, we are then able to gauge a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and better earnings retention are generally the ones with a higher growth rate compared to companies that don’t. same characteristics.
Profit growth and ROE of 14% of Jinchuan Group International Resources
At first glance, Jinchuan Group International Resources appears to have a decent ROE. And comparing with the industry, we found that the industry average ROE is similar at 12%. This certainly adds some context to Jinchuan Group International Resources’ moderate 16% net profit growth seen over the past five years.
We then compared Jinchuan Group International Resources’ net income growth with the industry and found that the company’s growth figure is lower than the industry average growth rate of 24% over the same period. , which is a little worrying.
Earnings growth is an important metric to consider when evaluating a stock. It is important for an investor to know whether the market has priced in the expected growth (or decline) in the company’s earnings. By doing so, they will get an idea if the stock is headed for clear blue waters or if swampy waters are waiting. If you’re wondering about the valuation of Jinchuan Group International Resources, check out this indicator of its price/earnings ratio, relative to its sector.
Does Jinchuan Group International Resources use its profits effectively?
In the case of Jinchuan Group International Resources, its respectable earnings growth is likely due to its low three-year median payout ratio of 2.7% (or a retention rate of 97%), suggesting that the he company invests most of its profits in developing its business.
Additionally, Jinchuan Group International Resources is committed to continuing to share its profits with shareholders, which we infer from its long three-year history of paying dividends.
Overall, we believe that the performance of Jinchuan Group International Resources has been quite good. In particular, it is good to see that the company is investing heavily in its business and, along with a high rate of return, this has led to respectable growth in its profits. That said, the latest forecasts from industry analysts show that the company’s earnings are set to accelerate. For more on the company’s future earnings growth forecast, check out this free analyst forecast report for the company to learn more.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.