Are Strong Financial Prospects The Force That Is Driving The Momentum In Inner Mongolia Xingye Silver &Tin Mining Co.,Ltd's SZSE:000426) Stock?

Inner Mongolia Xingye Silver &Tin MiningLtd's (SZSE:000426) stock is up by a considerable 49% over the past three months. 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 Inner Mongolia Xingye Silver &Tin MiningLtd's ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

View our latest analysis for Inner Mongolia Xingye Silver &Tin MiningLtd

How To 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 Inner Mongolia Xingye Silver &Tin MiningLtd is:

17% = CN¥1.2b ÷ CN¥6.8b (Based on the trailing twelve months to March 2024).

The 'return' is the profit over the last twelve months. So, this means that for every CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.17.

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 all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Inner Mongolia Xingye Silver &Tin MiningLtd's Earnings Growth And 17% ROE

At first glance, Inner Mongolia Xingye Silver &Tin MiningLtd seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 7.4%. This probably laid the ground for Inner Mongolia Xingye Silver &Tin MiningLtd's significant 73% net income growth seen over the past five years. We believe that there might also be other aspects that are positively influencing the company's earnings growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

We then compared Inner Mongolia Xingye Silver &Tin MiningLtd's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 12% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock's future looks promising or ominous. Is Inner Mongolia Xingye Silver &Tin MiningLtd fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Inner Mongolia Xingye Silver &Tin MiningLtd Efficiently Re-investing Its Profits?

Inner Mongolia Xingye Silver &Tin MiningLtd has a really low three-year median payout ratio of 15%, meaning that it has the remaining 85% left over to reinvest into its business. So it looks like Inner Mongolia Xingye Silver &Tin MiningLtd is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Moreover, Inner Mongolia Xingye Silver &Tin MiningLtd is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years.

Conclusion

On the whole, we feel that Inner Mongolia Xingye Silver &Tin MiningLtd's performance has been quite good. In particular, it's great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.