【crepe myrtle new orleans】How Good Is Harvia Oyj (HEL:HARVIA), When It Comes To ROE?
While some investors are already well versed in financial metrics (hat tip),crepe myrtle new orleans this article is for those who would like to learn about Return On Equity (ROE) and why it is important. To keep the lesson grounded in practicality, we'll use ROE to better understand Harvia Oyj (
HEL:HARVIA
).
Over the last twelve months
Harvia Oyj has recorded a ROE of 12%
. That means that for every €1 worth of shareholders' equity, it generated €0.12 in profit.
See our latest analysis for Harvia Oyj
How Do I Calculate ROE?
The
formula for return on equity
is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
Or for Harvia Oyj:
12% = €8.6m ÷ €70m (Based on the trailing twelve months to September 2019.)
It's easy to understand the 'net profit' part of that equation, but 'shareholders' equity' requires further explanation. It is the capital paid in by shareholders, plus any retained earnings. You can calculate shareholders' equity by subtracting the company's total liabilities from its total assets.
What Does Return On Equity Signify?
ROE looks at the amount a company earns relative to the money it has kept within the business. The 'return' is the amount earned after tax over the last twelve months. That means that the higher the ROE, the more profitable the company is. So, all else equal,
investors should like a high ROE
. That means ROE can be used to compare two businesses.
Does Harvia Oyj 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. The image below shows that Harvia Oyj has an ROE that is roughly in line with the Leisure industry average (12%).
HLSE:HARVIA Past Revenue and Net Income, January 1st 2020
That's not overly surprising. ROE tells us about the quality of the business, but it does not give us much of an idea if the share price is cheap. For those who like to find
winning investments
this
free
list of growing companies with recent insider purchasing, could be just the ticket.
How Does Debt Impact Return On Equity?
Most companies need money -- from somewhere -- to grow their profits. That cash can come from issuing shares, retained earnings, or debt. In the case of the first and second options, the ROE will reflect this use of cash, for growth. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same.
Story continues
Harvia Oyj's Debt And Its 12% ROE
Although Harvia Oyj does use debt, its debt to equity ratio of 0.55 is still low. The combination of modest debt and a very respectable ROE suggests this is a business worth watching. 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 ROE
Return on equity is useful for comparing the quality of different businesses. A company that can achieve a high return on equity without debt could be considered a high quality business. 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 this
free
list of interesting companies, that have HIGH return on equity and low debt.
If you spot an error that warrants correction, please contact the editor at
. 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.
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. Thank you for reading.
View comments
-
SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Spirit AeroSystems Holdings, Inc. - SPRHow Worried Should Align Technology Investors Be About the SmileDirectClub Threat?Snapchat's April Fools' joke shows it can copy Facebook for a changeBRIEF-Xiamen Kehua Hengsheng To Change Company Name To Kehua Hengsheng Co LtdGerman industrial order rise more than expected in OctoberGame of Thrones Is No Longer the Most Pirated TV ShowScHoolboy Q Announces New Album ‘Blue Lips’ Coming Next MonthGTT: Termination and implementation of a liquidity contractU.S. Supreme Court justices question human rights claims against Nestle and Cargill7 Great Dividend Choices to Welcome 2019
下一篇:Rackspace Technology Among the First to Support the Launch of Professional Services in AWS Marketplace, Announces New Professional Services & Solutions at AWS re:Invent 2020
- ·Crude Oil Price Update – Needs to Hold Major 50% Level at $36.07 to Sustain Upside Momentum
- ·USDA chief says unknown whether China will remove tariffs on U.S. soy imports
- ·Coral Gables Office Building Sells for $2.6 Million
- ·BRIEF-E Lighting Group Sees Net Loss For Nine Months Ended Dec 31
- ·Trump, Macron weigh UN leaders' meeting on coronavirus -White House
- ·5 Top Stocks to Own This February
- ·JPJ Group PLC Announces Total Voting Rights
- ·How to Trade New Nasdaq-100 Stocks In 2019
- ·Iran watchdog passes law on hardening nuclear stance, halting UN inspections
- ·Ashley Graham on Challenging Beauty Standards in DNCE’s ‘Toothbrush’ Video With Joe Jonas: Exclusive
- ·Tesla triples deliveries of electric cars but share price tumbles
- ·Meghan Trainor’s TMI Comments on Daryl Sabara Marriage: From ‘Gross’ Toilet Moments to ‘Painful’ Sex
- ·Why You Should Leave Strix Group Plc's (LON:KETL) Upcoming Dividend On The Shelf
- ·Could Lincoln Minerals Limited’s (ASX:LML) Investor Composition Influence The Stock Price?
- ·Laverne Cox Recalls 'Trauma' of Watching Loved Ones Die of HIV/AIDS and Wondering, 'Am I Next?'
- ·World stocks edge down ahead of US jobs report
- ·Euro Sun Mining Announces the Filing of a Business Acquisition Report in Connection with its Acquisition of Vilhelmina Minerals Inc.
- ·Forex Daily Outlook – January 2, 2019
- ·James Gunn Debunks More Superman DCU Casting Rumors
- ·This Custom Lancia Aurelia Outlaw Is the Most Unlikely Restomod
- ·Global 5G infrastructure market size to reach USD 47.6 Billion by 2027
- ·Do You Like nVent Electric plc (NYSE:NVT) At This P/E Ratio?
- ·Is Primoris Services Corporation (NASDAQ:PRIM) Expensive For A Reason? A Look At The Intrinsic Value
- ·FOREX-Yen soars as growth concerns dampen appetite
- ·It's not over until there is no virus anywhere in the world - WHO
- ·China to execute driver who killed passenger of ride-hailing firm Didi
- ·Market Sentiment Improves As Investors Pin Hopes on G7 Action
- ·Fortnite's Season 8 Is Here—and There Be Pirates
- ·Nigeria's Kaduna refinery expected to resume by mid-April - NNPC
- ·Why Palo Alto Networks Has Spent Over $1 Billion on Acquisitions
- ·FOREX-Dollar on back foot as recovery optimism persists
- ·Shire plc : Rule 2.9 Announcement
- ·Should You Be Impressed By Michael Hill International Limited’s (ASX:MHJ) ROE?
- ·Going Green Goblin for 'Spider-Man 2': Dane DeHaan gets into character
- ·Open enrollment 2021: You may be able to carry over unused FSA funds of up to $550
- ·Why Palo Alto Networks Has Spent Over $1 Billion on Acquisitions