With A 5.2% Return On Equity, Is SPH REIT (SGX:SK6U) A Quality Stock?

Simply Wall St.2019-10-08

Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to ...

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This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to ...</p>\n\n<a href=\"https://finance.yahoo.com/news/5-2-return-equity-sph-060234667.html\">网页链接</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SK6U.SI","symbol_name":"百利宫房地产投资信托","start_time":0,"source_url":"https://finance.yahoo.com/news/5-2-return-equity-sph-060234667.html","article_id":"2034102643","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/EeO0EYP_.8SBi1aef_IIGQ--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/2fcdc66a99045cbc6a9bd00ec02ee8a7"],"rights":{"source":"yahoofinance_sg","url":"https://finance.yahoo.com/news/5-2-return-equity-sph-060234667.html","rn_cache_url":null,"customStyle":"","selectors":"article, body","filters":"","directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2034102643","pubTimestamp":1570514554,"sourceInfo":{"source_id":"yahoofinance_sg","name":"Yahoo Finance"},"weMediaInfo":null,"summary":"Many investors are still learning about the various metrics that can be useful when analysing a stoc","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SK6U.SI":"百利宫房地产投资信托"},"translate_title":"拥有5.2%的股本回报率，SPH REIT(SGX:SK6U)是优质股票吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"SK6U.SI":1,"T39.SI":1},"content_text":"Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to examine SPH REIT (SGX:SK6U), by way of a worked example.Our data shows SPH REIT has a return on equity of 5.2% for the last year. One way to conceptualize this, is that for each SGD1 of shareholders' equity it has, the company made SGD0.05 in profit. View our latest analysis for SPH REIT How Do I Calculate ROE?The formula for ROE is:Return on Equity = Net Profit ÷ Shareholders' EquityOr for SPH REIT:5.2% = S$140m ÷ S$2.4b (Based on the trailing twelve months to May 2019.)Most readers would understand what net profit is, but it’s worth explaining the concept of shareholders’ equity. It is all earnings retained by the company, plus any capital paid in by shareholders. The easiest way to calculate shareholders' equity is to subtract the company's total liabilities from the total assets.What Does ROE Signify?ROE measures a company's profitability against the profit it retains, and any outside investments. The 'return' is the yearly profit. A higher profit will lead to a higher ROE. So, all else being equal, a high ROE is better than a low one. Clearly, then, one can use ROE to compare different companies.Does SPH REIT Have A Good ROE?Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. As shown in the graphic below, SPH REIT has a lower ROE than the average (6.9%) in the REITs industry classification.Unfortunately, that's sub-optimal. It is better when the ROE is above industry average, but a low one doesn't necessarily mean the business is overpriced. Nonetheless, it could be useful to double-check if insiders have sold shares recently.The Importance Of Debt To Return On EquityMost companies need money -- from somewhere -- to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the use of debt will improve the returns, but will not change the equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking.SPH REIT's Debt And Its 5.2% ROESPH REIT has a debt to equity ratio of 0.45, which is far from excessive. Although the ROE isn't overly impressive, the debt load is modest, suggesting the business has potential. Conservative use of debt to boost returns is usually a good move for shareholders, though it does leave the company more exposed to interest rate rises.The Bottom Line On ROEReturn on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. In my book the highest quality companies have high return on equity, despite low debt. All else being equal, a higher ROE is better.But when a business is high quality, the market often bids it up to a price that reflects this. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So I think it may be worth checking this free report on analyst forecasts for the company.If you would prefer check out another company -- one with potentially superior financials -- then do not miss thisfree list of interesting companies, that have HIGH return on equity and low debt.We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2034102643"}