Take a look at the ROE of Excellence Commercial Property & Facilities Management Group Limited (HKG: 6989)


Many investors are still educating themselves about the various metrics that can be useful when analyzing a stock. This article is for those who want to learn more about return on equity (ROE). We’ll use ROE to look at Excellence Commercial Property & Facilities Management Group Limited (HKG: 6989), using a real-world example.

ROE or return on equity is a useful tool to assess how effectively a company can generate the returns on investment it has received from its shareholders. In other words, it is a profitability ratio that measures the rate of return on capital contributed by the shareholders of the company.

See our latest analysis for Excellence Commercial Property & Facilities Management Group

How do you calculate return on equity?

ROE can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

Thus, based on the above formula, the ROE for Excellence Commercial Property & Facilities Management Group is:

11% = CN ¥ 356m CN ¥ 3.3b (Based on the last twelve months up to December 2020).

“Return” refers to a company’s profits over the past year. This means that for every HK $ 1 worth of equity, the company generated HK $ 0.11 in profit.

Does the Excellence Commercial Property & Facilities Management group have a good ROE?

Perhaps the easiest way to assess a company’s ROE is to compare it to the industry average. However, this method is only useful as a rough check, as companies differ a lot within a single industry classification. If you look at the image below, you can see that Excellence Commercial Property & Facilities Management Group has an ROE similar to the real estate industry classification average (9.2%).

SEHK: 6,989 Return on equity July 21, 2021

It is neither particularly good nor bad. While at least the ROE is not lower than that of the industry, it is still worth checking out what role corporate debt plays, as high levels of debt relative to equity can also make a difference. seem high ROE. If this is true, it is more an indication of risk than potential.

The importance of debt to return on equity

Businesses generally need to invest money to increase their profits. The money for the investment can come from the profits of the previous year (retained earnings), from the issuance of new shares or from loans. In the first and second cases, the ROE will reflect this use of cash for investing in the business. In the latter case, the debt used for growth will improve returns, but will not affect total equity. This will make the ROE better than if no debt was used.

Debt of Excellence Commercial Property & Facilities Management Group and its ROE of 11%

Although Excellence Commercial Property & Facilities Management Group has some debt, with a debt-to-equity ratio of just 0.11, we wouldn’t say the debt is excessive. His very respectable ROE, combined with modest debt, suggests that the company is in good health. The prudent use of debt to increase returns is often very good for shareholders. However, this could reduce the company’s ability to take advantage of future opportunities.


Return on equity is a way to compare the quality of the business of different companies. Firms that can earn high returns on equity without taking on too much debt are generally of good quality. If two companies have the same ROE, then I would generally prefer the one with the least amount of debt.

But ROE is only one piece of a bigger puzzle, as high-quality companies often trade at high earnings multiples. It is important to take into account other factors, such as future profit growth and the amount of investment required for the future. So you might want to check out this FREE visualization of analyst forecasts for the business.

But beware : Excellence Commercial Property & Facilities Management Group may not be the best stock to buy. So take a look at this free list of interesting companies with high ROE and low debt.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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