Discover If Haoxi Health Technology Limited’s (NASDAQ:HAO) 11% ROE Stands Out in the Market

Investors often dive into different ways of analyzing stocks. This piece focuses on Return On Equity (ROE), particularly for Haoxi Health Technology Limited (NASDAQ:HAO). Let’s explore ROE together!

Return on Equity, or ROE, is crucial for shareholders. It shows how well a company is using shareholder funds to generate profits. In simpler terms, it tells you how much profit is made for every dollar invested by shareholders.

The formula for ROE is straightforward:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

Applying this formula, Haoxi Health Technology’s ROE comes out to be:

11% = US$1.3m ÷ US$11m (Based on the last twelve months to June 2024).

This means that for every dollar invested by shareholders, Haoxi made a profit of $0.11 last year.

To evaluate a company’s performance, we can compare its ROE to the industry average. While useful, this should be a simple check, as companies in the same industry can vary greatly. Haoxi Health Technology’s ROE matches the average in the Media industry at 11%.

This isn’t particularly great or terrible. Since Haoxi’s ROE is on par with its industry, it’s important to check if this ROE comes from high debt levels. Excessive debt can increase the risk of default. You can check out the risks we’ve identified for Haoxi Health Technology for a clearer picture.

Companies often need to invest to grow their profits. They can do this using retained earnings, issuing new stock, or taking on debt. When a company uses debt, it can boost ROE without affecting shareholders’ equity. However, this approach increases risk.

Haoxi Health Technology’s debt to equity ratio is low at 0.11. This suggests that while it uses some debt, it’s manageable. A modest debt level combined with a decent ROE might make this company worth monitoring. Using debt wisely can improve returns, but there’s always some risk involved.

ROE helps in comparing different companies. A business that achieves a high ROE without using debt can be seen as a strong performer. Generally, a higher ROE is preferred. However, ROE is just one part of the story. It’s also vital to look at factors like future profit growth and necessary investments. Examining how the company has performed in the past can provide useful insights as well.

This article is for informational purposes. We provide analysis based on historical data and forecasts, not financial advice. Please consider your own objectives and situation before making any investment decisions. Remember, our analysis might not include the latest company updates or qualitative data. Simply Wall St has no position in any stocks mentioned.