Flat Glass Group Co., Ltd. (HKG:6865) The stock has shown weakness lately, but financials look solid: should potential shareholders take the plunge?

With its stock down 8.7% over the past month, it’s easy to overlook Flat Glass Group (HKG: 6865). However, stock prices are usually determined by a company’s long-term financial performance, which in this case looks quite promising. In this article, we decided to focus on Flat Glass Group’s ROE.

Return on Equity or ROE is a test of how effectively a company increases its value and manages investors’ money. In simpler terms, it measures a company’s profitability relative to equity.

See our latest analysis for Flat Glass Group

How to calculate return on equity?

the return on equity formula East:

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

So, based on the above formula, the ROE for Flat Glass Group is:

22% = CN¥2.5b ÷ CN¥11b (Based on past twelve months to September 2021).

The “return” is the annual profit. So this means that for every HK$1 investment of its shareholder, the company generates a profit of HK$0.22.

What is the relationship between ROE and earnings growth?

So far, we have learned that ROE measures how efficiently a company generates its profits. We now need to assess how much profit the company is reinvesting or “retaining” for future growth, which then gives us an idea of ​​the company’s growth potential. Generally speaking, all things being equal, companies with high return on equity and earnings retention have a higher growth rate than companies that do not share these attributes.

Flat Glass Group profit growth and 22% ROE

For starters, Flat Glass Group has a pretty high ROE, which is interesting. Second, even when compared to the industry average of 10%, the company’s ROE is quite impressive. As a result, Flat Glass Group’s outstanding 39% net profit growth over the past five years comes as no surprise.

Then, comparing with the industry net income growth, we found that Flat Glass Group’s growth is quite high compared to the average industry growth of 21% over the same period, which is great to see.

SEHK: 6865 Past Earnings Growth Feb 27, 2022

Earnings growth is an important metric to consider when evaluating 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 them determine whether the action is placed for a bright or bleak future. Is Flat Glass Group correctly valued compared to other companies? These 3 assessment metrics might help you decide.

Is Flat Glass Group effectively using its retained earnings?

Although the company has paid a portion of its dividend in the past, it currently does not pay any dividend. This is probably what explains the strong earnings growth discussed above.

Summary

Overall, we are quite satisfied with the performance of Flat Glass Group. Specifically, we like that the company reinvests a large portion of its earnings at a high rate of return. This of course caused the company to see substantial growth in profits. That said, the company’s earnings growth is expected to slow, as expected in current analyst estimates. Are these analyst expectations based on general industry expectations or company fundamentals? Click here to access our analyst forecast page for the company.

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.

About Meredith Campagna

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