Does Zhejiang VIE Science & Technology Co., Ltd. (SZSE:002590) stock’s recent performance have anything to do with its financial health?

Zhejiang VIE Technology (SZSE:002590) stock has increased by 8.0% in the past three months. Since a company’s long-term fundamentals typically drive market outcomes, we wonder what role, if any, a company’s financials play in price movements. I am thinking. In particular, I would like to pay attention to Zhejiang VIE Technology’s ROE today.

Return on equity or ROE tests how effectively a company is growing its value and managing investors’ money. More simply, it measures a company’s profitability in relation to shareholder equity.

Check out our latest analysis on Zhejiang VIE Science and Technology.

How do you calculate return on equity?

Return on equity can be calculated using the following formula:

Return on equity = Net income (from continuing operations) ÷ Shareholders’ equity

So, based on the above formula, Zhejiang VIE Science & Technology’s ROE is:

10% = CA$222 million ÷ CA$2.2 billion (based on trailing twelve months to September 2023).

“Return” is the annual profit. Another way to think of it is that for every 1 CN worth of shares, the company allowed him to earn a profit of 0.10 CN.

What is the relationship between ROE and profit growth?

So far, we have learned that ROE is a measure of a company’s profitability. Depending on how much of these profits a company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. All else being equal, companies with higher return on equity and profit retention typically have higher growth rates compared to companies that don’t have the same characteristics.

A side-by-side comparison of Zhejiang VIE Science & Technology’s earnings growth and ROE 10%

At first glance, Zhejiang VIE Technology’s ROE doesn’t seem to attract much attention. However, upon closer inspection, his ROE for the company is higher than the industry average of his 7.5%, which is hard to miss. Especially when you look at Zhejiang VIE Science & Technology’s impressive net profit growth of 31% over the past five years. Note that the company’s ROE is moderately low. It’s just that the industry’s ROE is low. So there could be some other aspects that are causing the increase in revenue. Companies with high profit retention rates or in high-growth industries.

Next, if we compare it to the industry’s net income growth rate, we find that Zhejiang VIE Science & Technology’s growth rate is quite high when compared to the industry average growth rate of 4.0% over the same period, which is impressive.

The foundations that give a company value have a lot to do with its revenue growth. Investors should check whether expected earnings growth or decline has been factored in in any case. By doing so, you can find out if the stock is headed for clear blue waters or if a swamp awaits. If you’re curious about Zhejiang VIE Science & Technology’s valuation, check out this gauge of its price-to-earnings ratio compared to its industry.

Is Zhejiang VIE Technology using profits efficiently?

Zhejiang VIE Technology’s high three-year median dividend payout ratio of 50% (meaning it only retains 50% of its profits) means that even though the company has returned most of its profits to shareholders, This suggests that growth was not actually impeded.

Furthermore, Zhejiang VIE Science & Technology has been paying dividends for at least 10 years, which means the company is pretty serious about sharing its profits with shareholders.

summary

Overall, there seem to be some positive aspects to Zhejiang VIE Science & Technology’s business. Particularly notable is the strong revenue growth backed by decent ROE. Despite reinvesting only a small portion of its profits, the company has still managed to grow its earnings, which is commendable. So far, we’ve only briefly covered the company’s revenue growth.So it might be worth checking this free Detailed graph Analyze Zhejiang VIE Science & Technology’s past earnings, revenue, and cash flow to gain deeper insight into the company’s performance.

Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.