Academy of Environmental Planning and Design, Co.,Ltd. Nanjing University's (SZSE:300864) Stock's On An Uptrend: Are Strong Financials Guiding The Market?

Academy of Environmental Planning and DesignLtd. Nanjing University's (SZSE:300864) stock is up by a considerable 11% over the past week. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Academy of Environmental Planning and DesignLtd. Nanjing University's ROE in this article.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

See our latest analysis for Academy of Environmental Planning and DesignLtd. Nanjing University

How Do You Calculate Return On Equity?

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 Academy of Environmental Planning and DesignLtd. Nanjing University is:

14% = CN¥167m ÷ CN¥1.2b (Based on the trailing twelve months to March 2024).

The 'return' refers to a company's earnings over the last year. That means that for every CN¥1 worth of shareholders' equity, the company generated CN¥0.14 in profit.

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

A Side By Side comparison of Academy of Environmental Planning and DesignLtd. Nanjing University's Earnings Growth And 14% ROE

To begin with, Academy of Environmental Planning and DesignLtd. Nanjing University seems to have a respectable ROE. Especially when compared to the industry average of 5.1% the company's ROE looks pretty impressive. Probably as a result of this, Academy of Environmental Planning and DesignLtd. Nanjing University was able to see a decent growth of 5.9% over the last five years.

As a next step, we compared Academy of Environmental Planning and DesignLtd. Nanjing University'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 4.7%.

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. Doing so will help them establish if the stock's future looks promising or ominous. Is Academy of Environmental Planning and DesignLtd. Nanjing University fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Academy of Environmental Planning and DesignLtd. Nanjing University Making Efficient Use Of Its Profits?

The high three-year median payout ratio of 67% (or a retention ratio of 33%) for Academy of Environmental Planning and DesignLtd. Nanjing University suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Moreover, Academy of Environmental Planning and DesignLtd. Nanjing University is determined to keep sharing its profits with shareholders which we infer from its long history of three years of paying a dividend.

Conclusion

In total, we are pretty happy with Academy of Environmental Planning and DesignLtd. Nanjing University's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. So far, we've only made a quick discussion around the company's earnings growth. So it may be worth checking this free detailed graph of Academy of Environmental Planning and DesignLtd. Nanjing University'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.