Stock Analysis

Is Anli International Co., Ltd.'s (GTSM:5223) Latest Stock Performance Being Led By Its Strong Fundamentals?

TPEX:5223
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Anli International's (GTSM:5223) stock is up by 4.3% over the past three months. Given its impressive performance, we decided to study the company's key financial indicators as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Anli International's ROE.

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.

Check out our latest analysis for Anli International

How Do You Calculate Return On Equity?

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 Anli International is:

15% = NT$245m ÷ NT$1.6b (Based on the trailing twelve months to September 2020).

The 'return' is the profit over the last twelve months. One way to conceptualize this is that for each NT$1 of shareholders' capital it has, the company made NT$0.15 in profit.

Why Is ROE Important For Earnings Growth?

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

Anli International's Earnings Growth And 15% ROE

To start with, Anli International's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 9.8%. Probably as a result of this, Anli International was able to see an impressive net income growth of 24% over the last five years. We reckon that there could also be other factors at play here. 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 Anli International'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 1.2% in the same period.

past-earnings-growth
GTSM:5223 Past Earnings Growth January 7th 2021

Earnings growth is a huge factor in stock valuation. 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. If you're wondering about Anli International's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Anli International Making Efficient Use Of Its Profits?

Anli International's significant three-year median payout ratio of 52% (where it is retaining only 48% of its income) suggests that the company has been able to achieve a high growth in earnings despite returning most of its income to shareholders.

While Anli International has been growing its earnings, it only recently started to pay dividends which likely means that the company decided to impress new and existing shareholders with a dividend.

Conclusion

On the whole, we feel that Anli International's performance has been quite good. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. Up till now, we've only made a short study of the company's growth data. You can do your own research on Anli International and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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This article by Simply Wall St is general in nature. 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.
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