Do Its Financials Have Any Role To Play In Driving World-Link Logistics (Asia) Holding Limited's (HKG:6083) Stock Up Recently?

Most readers would already be aware that World-Link Logistics (Asia) Holding's (HKG:6083) stock increased significantly by 73% over the past three months. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Specifically, we decided to study World-Link Logistics (Asia) Holding'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.

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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 World-Link Logistics (Asia) Holding is:

17% = HK$18m ÷ HK$103m (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. Another way to think of that is that for every HK$1 worth of equity, the company was able to earn HK$0.17 in profit.

See our latest analysis for World-Link Logistics (Asia) Holding

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. 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.

World-Link Logistics (Asia) Holding's Earnings Growth And 17% ROE

At first glance, World-Link Logistics (Asia) Holding seems to have a decent ROE. Especially when compared to the industry average of 6.7% the company's ROE looks pretty impressive. Given the circumstances, we can't help but wonder why World-Link Logistics (Asia) Holding saw little to no growth in the past five years. Based on this, we feel that there might be other reasons which haven't been discussed so far in this article that could be hampering the company's growth. For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance.

Next, on comparing with the industry net income growth, we found that the industry grew its earnings by 22% over the last few years.

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). Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about World-Link Logistics (Asia) Holding's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is World-Link Logistics (Asia) Holding Efficiently Re-investing Its Profits?

World-Link Logistics (Asia) Holding has a high three-year median payout ratio of 66% (or a retention ratio of 34%), meaning that the company is paying most of its profits as dividends to its shareholders. This does go some way in explaining why there's been no growth in its earnings.

In addition, World-Link Logistics (Asia) Holding has been paying dividends over a period of eight years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth.

Summary

Overall, we feel that World-Link Logistics (Asia) Holding certainly does have some positive factors to consider. However, while the company does have a high ROE, its earnings growth number is quite disappointing. This can be blamed on the fact that it reinvests only a small portion of its profits and pays out the rest as dividends. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. So it may be worth checking this free detailed graph of World-Link Logistics (Asia) Holding'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.