您现在的位置是:Focus >>正文
【wolverine 1000 mile rough out】Should We Be Delighted With TCPL Packaging Limited’s (NSE:TCPLPACK) ROE Of 12%?
Focus188人已围观
简介While some investors are already well versed in financial metrics (hat tip), this article is for tho ...
While some investors are already well versed in financial metrics (hat tip),wolverine 1000 mile rough out this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We’ll use ROE to examine TCPL Packaging Limited (
NSE:TCPLPACK
), by way of a worked example.
TCPL Packaging has a ROE of 12%
, based on the last twelve months. Another way to think of that is that for every ₹1 worth of equity in the company, it was able to earn ₹0.12.
Check out our latest analysis for TCPL Packaging
How Do I Calculate Return On Equity?
The
formula for return on equity
is:
Return on Equity = Net Profit ÷ Shareholders’ Equity
Or for TCPL Packaging:
12% = 272.299 ÷ ₹2.3b (Based on the trailing twelve months to September 2018.)
Most know that net profit is the total earnings after all expenses, but the concept of shareholders’ equity is a little more complicated. It is all earnings retained by the company, plus any capital paid in by shareholders. Shareholders’ equity can be calculated by subtracting the total liabilities of the company from the total assets of the company.
What Does ROE Signify?
Return on Equity measures a company’s profitability against the profit it has kept for the business (plus any capital injections). The ‘return’ is the profit over the last twelve months. That means that the higher the ROE, the more profitable the company is. So, as a general rule,
a high ROE is a good thing
. That means it can be interesting to compare the ROE of different companies.
Does TCPL Packaging Have A Good ROE?
One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. As you can see in the graphic below, TCPL Packaging has a higher ROE than the average (8.7%) in the Packaging industry.
NSEI:TCPLPACK Last Perf January 2nd 19
That’s clearly a positive. We think a high ROE, alone, is usually enough to justify further research into a company. One data point to check is if
insiders have bought shares recently
.
How Does Debt Impact ROE?
Virtually all companies need money to invest in the business, to grow profits. That cash can come from retained earnings, issuing new shares (equity), or debt. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders’ equity. That will make the ROE look better than if no debt was used.
Story continues
Combining TCPL Packaging’s Debt And Its 12% Return On Equity
TCPL Packaging does use a significant amount of debt to increase returns. It has a debt to equity ratio of 1.39. The company doesn’t have a bad ROE, but it is less than ideal tht it has had to use debt to achieve its returns. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it.
But It’s Just One Metric
Return on equity is one way we can compare the business quality of different companies. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have the same ROE, then I would generally prefer the one with less debt.
Having said that, while ROE is a useful indicator of business quality, you’ll have to look at a whole range of factors to determine the right price to buy a stock. It is important to consider other factors, such as future profit growth — and how much investment is required going forward. So I think it may be worth checking this
free
this
detailed graph
of past earnings, revenue and cash flow
.
But note:
TCPL Packaging may not be the best stock to buy
. So take a peek at this
free
list of interesting companies with high ROE and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at
.
View comments
Tags:
相关文章
Bitcoin Falls 11% In Bearish Trade
FocusBitcoin Falls 11% In Bearish TradeInvesting.com - Bitcoin was trading at $8,238.5 by 12:18 (16:18 GM ...
【Focus】
阅读更多AP, News Media Guild reach new tentative 3 ½ year agreement
FocusNEW YORK (AP) — The Associated Press and the News Media Guild on Thursday reached a tentative agreem ...
【Focus】
阅读更多First Republic (FRC) Announces Offering of 4M Common Shares
FocusFirst Republic BankFRC is set to offer about 4 million common shares to the public at market price. ...
【Focus】
阅读更多
热门文章
- Here's What World Precision Machinery Limited's (SGX:B49) P/E Is Telling Us
- Burt Jenner Announces His Girlfriend Is Pregnant: 'So Happy I Can't See Straight'
- Samsung Heavy to absorb Samsung Engineering for $2.5 billion
- ‘Stranger Things’ Renewed for Third Season at Netflix
- ROSEN, A RESPECTED AND LEADING FIRM, Encourages GSX Techedu Inc. Investors to Contact Firm Before Deadline in Class Action Seeking Recovery of Investor Losses – GSX
- 10 Top Stock Picks From the Street’s Best Analysts
最新文章
-
3 Reasons Growth Investors Will Love Charles River (CRL)
-
Florida's Highway Safety Report Finds Crashes Continue to Decrease at Red-Light Safety Camera Intersections
-
Morning Fix: Young Acts Score Big Grammy Noms, But Bieber Snubbed; Concord Shopped To Equity Firms; Instagram Vs. Twitter
-
BRIEF-Hua Medicine Initiates First Combination Study Of Dorzagliatin With A Dpp-4 Inhibitor In United States
-
Crown Castle (CCI) Gains As Market Dips: What You Should Know
-
Why Petrobras Stock Popped 10%
友情链接
- Suzan Craig and Tahi Restore Nature and Make 100 Percent Natural, Genuine Honey
- Harvard and Yale Are No Match for the Bears
- Is The L.S. Starrett Company (SCX) Going to Burn These Hedge Funds?
- Why Semtech (SMTC) Stock Might be a Great Pick
- Italy opens borders ahead of neighbors, beckoning tourists
- More drugmakers hike U.S. prices as new year begins
- Wealth Glory Holdings Limited (HKG:8269): Did It Outperform The Industry?
- WhatsApp no longer supported on millions of phones
- EU open to compensating firms hit by coronavirus, more help for Italy
- Analyzing Brooks Automation's Ex-Dividend Date