Is Nanshan Aluminium International Holdings Limited's (HKG:2610) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Nanshan Aluminium International Holdings' (HKG:2610) stock is up by a considerable 31% 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. In this article, we decided to focus on Nanshan Aluminium International Holdings' 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.

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How Is ROE Calculated?

The formula for ROE is:

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

So, based on the above formula, the ROE for Nanshan Aluminium International Holdings is:

30% = US$553m ÷ US$1.8b (Based on the trailing twelve months to June 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each HK$1 of shareholders' capital it has, the company made HK$0.30 in profit.

Check out our latest analysis for Nanshan Aluminium International Holdings

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. 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 Nanshan Aluminium International Holdings' Earnings Growth And 30% ROE

To begin with, Nanshan Aluminium International Holdings has a pretty high ROE which is interesting. Second, a comparison with the average ROE reported by the industry of 12% also doesn't go unnoticed by us. As a result, Nanshan Aluminium International Holdings' exceptional 54% net income growth seen over the past five years, doesn't come as a surprise.

As a next step, we compared Nanshan Aluminium International Holdings' 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 15%.

Earnings growth is an important metric to consider when valuing a stock. 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. If you're wondering about Nanshan Aluminium International Holdings''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Nanshan Aluminium International Holdings Efficiently Re-investing Its Profits?

Nanshan Aluminium International Holdings has a really low three-year median payout ratio of 5.8%, meaning that it has the remaining 94% left over to reinvest into its business. So it looks like Nanshan Aluminium International Holdings is reinvesting profits heavily to grow its business, which shows in its earnings growth.

Conclusion

On the whole, we feel that Nanshan Aluminium International Holdings' performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see substantial growth in its earnings. Having said that, on studying current analyst estimates, we were concerned to see that while the company has grown its earnings in the past, analysts expect its earnings to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page 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.