A Closer Look At Swift Energy Technology Berhad's (KLSE:SET) Impressive ROE
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 Swift Energy Technology Berhad (KLSE:SET), by way of a worked example.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Swift Energy Technology Berhad is:
29% = RM17m ÷ RM59m (Based on the trailing twelve months to September 2024).
The 'return' is the income the business earned over the last year. Another way to think of that is that for every MYR1 worth of equity, the company was able to earn MYR0.29 in profit.
View our latest analysis for Swift Energy Technology Berhad
Arguably the easiest way to assess company's ROE is to compare it with the average in its industry. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. Pleasingly, Swift Energy Technology Berhad has a superior ROE than the average (6.8%) in the Machinery industry.
That is a good sign. Bear in mind, a high ROE doesn't always mean superior financial performance. A higher proportion of debt in a company's capital structure may also result in a high ROE, where the high debt levels could be a huge risk . You can see the 2 risks we have identified for Swift Energy Technology Berhad by visiting our risks dashboard for free on our platform here.
Companies usually need to invest money 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. That will make the ROE look better than if no debt was used.
Although Swift Energy Technology Berhad does use debt, its debt to equity ratio of 0.58 is still low. When I see a high ROE, fuelled by only modest debt, I suspect the business is high quality. Judicious use of debt to improve returns can certainly be a good thing, although it does elevate risk slightly and reduce future optionality.
Return on equity is one way we can compare its business quality of different companies. Companies that can achieve high returns on equity without too much debt are generally of good quality. All else being equal, a higher ROE is better.
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. 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.
Of course Swift Energy Technology Berhad may not be the best stock to buy. So you may wish to see this free collection of other companies that have high ROE and low debt.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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 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.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
9 minutes ago
- Yahoo
Fight over lumber tariffs could reshape future of US home building
Lumber is in the spotlight as the National Association of Home Builders (NAHB) and the U.S. Lumber Coalition disagree over what's behind the U.S. housing market slump. FOX Business correspondent Kelly Saberi reported Monday that the NAHB has pointed to tariff uncertainty and lumber prices as being partly responsible. The U.S.'s current anti-dumping and anti-subsidy duty on imported Canadian softwood lumber stands at 14.5%. It could potentially climb later in the year to nearly 35%. Canada's softwood lumber makes up roughly 85% of America's imports and almost a quarter of the U.S. supply, according to the NAHB. "I share President Trump's desire to create fair and balanced trade across our borders, certainly would bring back as much production as we can," NAHB CEO Jim Tobin said. "But until we do that, and it will take years and millions of dollars of investment, we need to make sure that we have a reliable, affordable source of lumber." Saberi reported that the U.S. Lumber Coalition "says that the price of lumber says something different about this story." Read On The Fox Business App Between May 2021 and April of this year, the random lengths framing composite price decreased 67%, she reported. It stood at $442 per 1,000 board feet as of May 23, per the NAHB. Meanwhile, the price of new homes has gone up 21%, Saberi reported. "Everything from regulatory costs to the cost of land and, quite frankly, also the cost of home builder profitability rates that have gone up, those are actually the driving forces of home affordability," U.S. Lumber Coalition executive director Zoltan van Heyningen told FOX Business. "Lumber just isn't one of them." Click Here To Read More On Fox Business The U.S. Lumber Coalition has also been critical of Canada, saying that "ongoing unfair trade practices" by its lumber industry have been "extremely harmful to U.S. lumber producers, workers, and their forest-dependent communities." John Kalabich, the owner of Acme Lumber in Chicago, told Saberi he was able to keep prices relatively flat over the past 12 months because of the duty on Canadian lumber. He has also heard from contractors that the demand for small repair work and big-ticket construction has gone down. Trump Issues Executive Orders Addressing Lumber Production, National Security Concerns Last month, the U.S. Census Bureau said single-family housing starts suffered a 2.1% decline from March to a seasonally adjusted annual rate of 927,000 in April. Sales of new single-family homes in April came in at a seasonally adjusted rate of 743,000, while sales of existing ones were 3.63 article source: Fight over lumber tariffs could reshape future of US home building
Yahoo
13 minutes ago
- Yahoo
HCK Capital Group Berhad's (KLSE:HCK) Weak Earnings May Only Reveal A Part Of The Whole Picture
The subdued market reaction suggests that HCK Capital Group Berhad's (KLSE:HCK) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, HCK Capital Group Berhad increased the number of shares on issue by 15% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of HCK Capital Group Berhad's EPS by clicking here. HCK Capital Group Berhad has improved its profit over the last three years, with an annualized gain of 605% in that time. In comparison, earnings per share only gained 450% over the same period. Net income was down 51% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 56%. And so, you can see quite clearly that dilution is influencing shareholder earnings. If HCK Capital Group Berhad's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of HCK Capital Group Berhad. Over the last year HCK Capital Group Berhad issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that HCK Capital Group Berhad's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of HCK Capital Group Berhad. This note has only looked at a single factor that sheds light on the nature of HCK Capital Group Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
13 minutes ago
- Yahoo
Why PWF Corporation Bhd's (KLSE:PWF) Shaky Earnings Are Just The Beginning Of Its Problems
PWF Corporation Bhd.'s (KLSE:PWF) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Importantly, our data indicates that PWF Corporation Bhd's profit received a boost of RM23m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. PWF Corporation Bhd had a rather significant contribution from unusual items relative to its profit to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of PWF Corporation Bhd. As we discussed above, we think the significant positive unusual item makes PWF Corporation Bhd's earnings a poor guide to its underlying profitability. For this reason, we think that PWF Corporation Bhd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing PWF Corporation Bhd at this point in time. You'd be interested to know, that we found 3 warning signs for PWF Corporation Bhd and you'll want to know about them. Today we've zoomed in on a single data point to better understand the nature of PWF Corporation Bhd's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
