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2 hours ago
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A Closer Look At GRC Limited's (SGX:S3N) Impressive ROE
Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). By way of learning-by-doing, we'll look at ROE to gain a better understanding of GRC Limited (SGX:S3N). Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. How To Calculate Return On Equity? The formula for return on equity is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for GRC is: 15% = S$12m ÷ S$84m (Based on the trailing twelve months to December 2024). The 'return' is the income the business earned over the last year. So, this means that for every SGD1 of its shareholder's investments, the company generates a profit of SGD0.15. Check out our latest analysis for GRC Does GRC Have A Good ROE? Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. Pleasingly, GRC has a superior ROE than the average (3.1%) in the Real Estate industry. That's clearly a positive. However, bear in mind that a high ROE doesn't necessarily indicate efficient profit generation. A higher proportion of debt in a company's capital structure may also result in a high ROE, where the high debt levels could be a huge risk . The Importance Of Debt To Return On Equity Virtually all companies need money to invest in the business, to grow profits. That cash can come from issuing shares, retained earnings, or debt. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the use of debt will improve the returns, but will not change the equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same. Combining GRC's Debt And Its 15% Return On Equity While GRC does have some debt, with a debt to equity ratio of just 0.30, we wouldn't say debt is excessive. The fact that it achieved a fairly good ROE with only modest debt suggests the business might be worth putting on your watchlist. Conservative use of debt to boost returns is usually a good move for shareholders, though it does leave the company more exposed to interest rate rises. Conclusion Return on equity is one way we can compare its business quality of different companies. Companies that can achieve high returns on equity without too much debt are generally of good quality. All else being equal, a higher ROE is better. But ROE is just one piece of a bigger puzzle, since high quality businesses often trade on high multiples of earnings. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. Check the past profit growth by GRC by looking at this visualization of past earnings, revenue and cash flow. Of course GRC may not be the best stock to buy. So you may wish to see this free collection of other companies that have high ROE and low debt. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
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2 hours ago
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Hour Glass' (SGX:AGS) Dividend Will Be SGD0.04
The Hour Glass Limited's (SGX:AGS) investors are due to receive a payment of SGD0.04 per share on 19th of August. This means that the annual payment is 3.0% of the current stock price, which is lower than what the rest of the industry is paying. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Hour Glass' Future Dividend Projections Appear Well Covered By Earnings Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Hour Glass was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business. Looking forward, earnings per share could rise by 14.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend. See our latest analysis for Hour Glass Dividend Volatility Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was SGD0.022, compared to the most recent full-year payment of SGD0.06. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious. The Dividend Looks Likely To Grow Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Hour Glass has grown earnings per share at 14% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time. Hour Glass Looks Like A Great Dividend Stock It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Hour Glass has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock. Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Hour Glass that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
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2 hours ago
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Is Wee Hur Holdings Ltd.'s (SGX:E3B) Recent Stock Performance Influenced By Its Fundamentals In Any Way?
Wee Hur Holdings' (SGX:E3B) stock is up by a considerable 34% over the past month. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Specifically, we decided to study Wee Hur Holdings' ROE in this article. Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. How Do You Calculate Return On Equity? The formula for ROE is: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Wee Hur Holdings is: 8.6% = S$57m ÷ S$662m (Based on the trailing twelve months to December 2024). The 'return' is the yearly profit. That means that for every SGD1 worth of shareholders' equity, the company generated SGD0.09 in profit. View our latest analysis for Wee Hur Holdings What Is The Relationship Between ROE And Earnings Growth? So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. Wee Hur Holdings' Earnings Growth And 8.6% ROE At first glance, Wee Hur Holdings' ROE doesn't look very promising. A quick further study shows that the company's ROE doesn't compare favorably to the industry average of 13% either. Despite this, surprisingly, Wee Hur Holdings saw an exceptional 27% net income growth over the past five years. Therefore, there could be other reasons behind this growth. Such as - high earnings retention or an efficient management in place. Next, on comparing Wee Hur Holdings' net income growth with the industry, we found that the company's reported growth is similar to the industry average growth rate of 30% over the last few years. The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. What is E3B worth today? The intrinsic value infographic in our free research report helps visualize whether E3B is currently mispriced by the market. Is Wee Hur Holdings Using Its Retained Earnings Effectively? Wee Hur Holdings' LTM (or last twelve month) payout ratio to shareholders is 17%, which is quite low. This implies that the company is retaining 83% of its profits. So it looks like Wee Hur Holdings is reinvesting profits heavily to grow its business, which shows in its earnings growth. Additionally, Wee Hur Holdings has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Existing analyst estimates suggest that the company's future payout ratio is expected to drop to 10% over the next three years. Accordingly, the expected drop in the payout ratio explains the expected increase in the company's ROE to 12%, over the same period. Summary Overall, we feel that Wee Hur Holdings certainly does have some positive factors to consider. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
