Is Weakness In Ausupreme International Holdings Limited (HKG:2031) Stock A Sign That The Market Could be Wrong Given Its Strong Financial Prospects?
It is hard to get excited after looking at Ausupreme International Holdings' (HKG:2031) recent performance, when its stock has declined 12% over the past week. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Ausupreme International Holdings' ROE today.
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.
How Is ROE Calculated?
ROE 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 Ausupreme International Holdings is:
17% = HK$33m ÷ HK$194m (Based on the trailing twelve months to September 2025).
The 'return' is the profit over the last twelve months. Another way to think of that is that for every HK$1 worth of equity, the company was able to earn HK$0.17 in profit.
See our latest analysis for Ausupreme International Holdings
Why Is ROE Important For Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. 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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.
A Side By Side comparison of Ausupreme International Holdings' Earnings Growth And 17% ROE
At first glance, Ausupreme International Holdings seems to have a decent ROE. Further, the company's ROE compares quite favorably to the industry average of 9.3%. Probably as a result of this, Ausupreme International Holdings was able to see an impressive net income growth of 56% over the last five years. However, there could also be other causes behind this growth. For instance, the company has a low payout ratio or is being managed efficiently.
Next, on comparing with the industry net income growth, we found that Ausupreme International Holdings' growth is quite high when compared to the industry average growth of 23% in the same period, which is great to see.
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. This then helps them determine if the stock is placed for a bright or bleak future. Is Ausupreme International Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is Ausupreme International Holdings Using Its Retained Earnings Effectively?
The high three-year median payout ratio of 51% (implying that it keeps only 49% of profits) for Ausupreme International Holdings suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.
Moreover, Ausupreme International Holdings is determined to keep sharing its profits with shareholders which we infer from its long history of seven years of paying a dividend.
Summary
Overall, we are quite pleased with Ausupreme International Holdings' performance. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that's probably a good sign. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of Ausupreme International Holdings' past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.