JS Global Lifestyle (HKG: 1691) stock is up a whopping 20% in the past three months. Since the market typically pays for a company’s long-term fundamentals, we decided to examine the company’s key performance indicators to see if they could affect the market. In particular, we decided to examine JS Global Lifestyle’s ROE in this article.
Return on Equity, or ROE, is a test of how effectively a company is increasing its value and managing investors’ money. In other words, it’s a profitability metric that measures the return on the capital provided by the company’s shareholders.
Check out our latest analysis for JS Global Lifestyle
How do you calculate the return on equity?
The Formula for the return on equity is:
Return on Equity = Net Income (from continuing operations) ÷ Equity
So, based on the formula above, the ROE for JS Global Lifestyle is:
12% = $ 170 million ÷ $ 1.4 billion (based on the last twelve months through June 2020).
The “rate of return” is the income that the company has earned over the past year. Another possibility is that for every HK $ 1 worth of equity, the company has made a profit of HK $ 0.12.
What is the relationship between ROI and earnings growth?
So far we have learned that ROE measures how efficiently a company generates its profits. Based on how much of its profits the company intends to reinvest or “keep”, we can then evaluate a company’s future ability to generate profits. Assuming that everything else stays the same, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that do not necessarily have these characteristics.
A side-by-side comparison of JS Global Lifestyle’s earnings growth and its 12% ROE
At first glance, JS Global Lifestyle seems to have a decent ROE. In addition, the company’s ROE is the industry average of 14%. As a result, this likely laid the foundation for the decent 20% growth that JS Global Lifestyle has seen over the past five years.
As a next step, we compared the net income growth of JS Global Lifestyle to that of the industry and happily found that the company’s growth is higher than the average industry growth of 12%.
SEHK: 1691 past earnings growth March 1, 2021
The foundation of a company’s value creation is largely tied to profit growth. It is important for an investor to know if the market has priced in the company’s expected earnings growth (or decline). This way, they have an idea of whether the stock is being directed into clear blue water or whether marshy water is waiting for it. If you were wondering about JS Global Lifestyle’s rating, check out this measure of value for money versus the industry.
Is JS Global Lifestyle reinvesting its profits efficiently?
Overall, we are very satisfied with the performance of JS Global Lifestyle. We particularly like that the company reinvests a large part of its profits with a high return. Of course, this has led to significant earnings growth for the company. With this in mind, the latest projections by industry analysts suggest that the company’s earnings are expected to accelerate. For more information on the latest analyst forecast for the company, see this visualization of analyst forecast for the company.
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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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