Is Jiangsu Sinopep-Allsino Biopharmaceutical Co., Ltd.'s (SHSE:688076) Recent Stock Performance Tethered To Its Strong Fundamentals?

Jiangsu Sinopep-Allsino Biopharmaceutical's (SHSE:688076) stock is up by a considerable 9.8% over the past month. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. In this article, we decided to focus on Jiangsu Sinopep-Allsino Biopharmaceutical's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.

Check out our latest analysis for Jiangsu Sinopep-Allsino Biopharmaceutical

How Is ROE Calculated?

Return on equity 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 Sinopep-Allsino Biopharmaceutical is:

15% = CN¥401m ÷ CN¥2.6b (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 CN¥1 of its shareholder's investments, the company generates a profit of CN¥0.15.

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

Jiangsu Sinopep-Allsino Biopharmaceutical's Earnings Growth And 15% ROE

At first glance, Jiangsu Sinopep-Allsino Biopharmaceutical seems to have a decent ROE. Especially when compared to the industry average of 7.8% the company's ROE looks pretty impressive. Probably as a result of this, Jiangsu Sinopep-Allsino Biopharmaceutical was able to see an impressive net income growth of 34% over the last 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 Jiangsu Sinopep-Allsino Biopharmaceutical'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 8.8% in the same 5-year period.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Jiangsu Sinopep-Allsino Biopharmaceutical fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Jiangsu Sinopep-Allsino Biopharmaceutical Making Efficient Use Of Its Profits?

The three-year median payout ratio for Jiangsu Sinopep-Allsino Biopharmaceutical is 32%, which is moderately low. The company is retaining the remaining 68%. By the looks of it, the dividend is well covered and Jiangsu Sinopep-Allsino Biopharmaceutical is reinvesting its profits efficiently as evidenced by its exceptional growth which we discussed above.

Additionally, Jiangsu Sinopep-Allsino Biopharmaceutical has paid dividends over a period of three years which means that the company is pretty serious about sharing its profits with shareholders.

Summary

Overall, we are quite pleased with Jiangsu Sinopep-Allsino Biopharmaceutical's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. 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.