Jiangsu Phoenix Publishing & Media Corporation Limited's (SHSE:601928) Recent Stock Performance Looks Decent- Can Strong Fundamentals Be the Reason?

Jiangsu Phoenix Publishing & Media's (SHSE:601928) stock is up by 7.2% over the past three months. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. Specifically, we decided to study Jiangsu Phoenix Publishing & Media's ROE in this article.

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. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

Check out our latest analysis for Jiangsu Phoenix Publishing & Media

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 Jiangsu Phoenix Publishing & Media is:

14% = CN¥2.6b ÷ CN¥19b (Based on the trailing twelve months to June 2024).

The 'return' is the income the business earned 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?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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.

Jiangsu Phoenix Publishing & Media's Earnings Growth And 14% ROE

To begin with, Jiangsu Phoenix Publishing & Media seems to have a respectable ROE. Further, the company's ROE compares quite favorably to the industry average of 5.4%. Probably as a result of this, Jiangsu Phoenix Publishing & Media was able to see a decent growth of 15% over the last five years.

Next, on comparing with the industry net income growth, we found that Jiangsu Phoenix Publishing & Media's growth is quite high when compared to the industry average growth of 2.3% in the same period, which is great to see.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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. Is Jiangsu Phoenix Publishing & Media fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Jiangsu Phoenix Publishing & Media Making Efficient Use Of Its Profits?

While Jiangsu Phoenix Publishing & Media has a three-year median payout ratio of 52% (which means it retains 48% of profits), the company has still seen a fair bit of earnings growth in the past, meaning that its high payout ratio hasn't hampered its ability to grow.

Besides, Jiangsu Phoenix Publishing & Media has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company is expected to rise to 65% over the next three years. Accordingly, the expected increase in the payout ratio explains the expected decline in the company's ROE to 9.5%, over the same period.

Conclusion

Overall, we are quite pleased with Jiangsu Phoenix Publishing & Media's performance. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that's probably a good sign. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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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.