Has Jiangsu Beiren Robot System Co., Ltd's (SHSE:688218) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

Jiangsu Beiren Robot System's (SHSE:688218) stock is up by a considerable 41% over the past three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. Particularly, we will be paying attention to Jiangsu Beiren Robot System's ROE today.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

View our latest analysis for Jiangsu Beiren Robot System

How Is ROE Calculated?

ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Jiangsu Beiren Robot System is:

5.2% = CN¥48m ÷ CN¥915m (Based on the trailing twelve months to September 2024).

The 'return' refers to a company's earnings over the last year. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.05.

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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

A Side By Side comparison of Jiangsu Beiren Robot System's Earnings Growth And 5.2% ROE

At first glance, Jiangsu Beiren Robot System's ROE doesn't look very promising. We then compared the company's ROE to the broader industry and were disappointed to see that the ROE is lower than the industry average of 6.6%. Jiangsu Beiren Robot System was still able to see a decent net income growth of 16% over the past five years. So, the growth in the company's earnings could probably have been caused by other variables. Such as - high earnings retention or an efficient management in place.

As a next step, we compared Jiangsu Beiren Robot System's net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 7.8%.

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. If you're wondering about Jiangsu Beiren Robot System's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Jiangsu Beiren Robot System Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 51% (or a retention ratio of 49%) for Jiangsu Beiren Robot System suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Moreover, Jiangsu Beiren Robot System is determined to keep sharing its profits with shareholders which we infer from its long history of five years of paying a dividend.

Summary

In total, it does look like Jiangsu Beiren Robot System has some positive aspects to its business. That is, quite an impressive growth in earnings. However, the low profit retention means that the company's earnings growth could have been higher, had it been reinvesting a higher portion of its profits. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of Jiangsu Beiren Robot System's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

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This 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.