Vtech Holdings Limited's (HKG:303) Financials Are Too Obscure To Link With Current Share Price Momentum: What's In Store For the Stock?

Simply Wall St.11-13

Vtech Holdings' (HKG:303) stock is up by 9.2% over the past three months. However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices,...

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However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices,...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/tech/hkg-303/vtech-holdings-shares/news/vtech-holdings-limiteds-hkg303-financials-are-too-obscure-to\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BYTNYN87.SGD","symbol_name":"PINEBRIDGE ASIA EX JAPAN SMALL CAP EQUITY \"A5\" (SGD) ACC","start_time":0,"source_url":"https://simplywall.st/stocks/hk/tech/hkg-303/vtech-holdings-shares/news/vtech-holdings-limiteds-hkg303-financials-are-too-obscure-to","article_id":"2483465250","we_media_id":null,"thumbnails":["https://images.simplywall.st/asset/industry/8111000-choice1-main-header/1585186745276"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2483465250","pubTimestamp":1731460020,"sourceInfo":{"source_id":"simplywall_highlight","name":"Simply Wall St."},"weMediaInfo":null,"summary":"Vtech Holdings' (HKG:303) stock is up by 9.2% over the past three months. However, we decided to study the company's...","collect":0,"end_time":0,"defaultTopTitle":"simplywall.st","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BYTNYN87.SGD":"PINEBRIDGE ASIA EX JAPAN SMALL CAP EQUITY \"A5\" (SGD) ACC","SG9999003461.SGD":"United Asia Pacific Infrastructure SGD","IE00BYQNZ168.SGD":"PINEBRIDGE ASIA EX JAPAN SMALL CAP EQUITY \"A5CP\" (SGD) ACC","00303":"VTECH HOLDINGS","IE00B12V2V27.USD":"柏瑞亚洲小盘股A(除日本)","BK1149":"通信设备"},"translate_title":"伟易达控股有限公司（HKG：303）的财务状况过于模糊，无法与当前的股价势头联系起来：该股的前景如何？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"00303":1},"content_text":"Vtech Holdings' (HKG:303) stock is up by 9.2% over the past three months.   However, we decided to study the company's mixed-bag of fundamentals to assess what this could mean for future share prices, as stock prices tend to be aligned with a company's long-term financial performance.      Specifically, we decided to study Vtech Holdings'  ROE in this article.    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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.  Check out our latest analysis for Vtech Holdings  How Is ROE Calculated?  The formula for ROE is:  Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Vtech Holdings is:26% = US$167m ÷ US$645m (Based on the trailing twelve months to March 2024). The 'return' is the profit over the last twelve months.  So, this means that for every HK$1 of its shareholder's investments, the company generates a profit of HK$0.26.   Why Is ROE Important For Earnings Growth?  Thus far, we have learned that ROE measures how efficiently a company is generating its profits.  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.  Vtech Holdings' Earnings Growth And 26% ROE   To begin with, Vtech Holdings has a pretty high ROE which is interesting.   Secondly, even when compared to the industry average of 9.4% the company's ROE is quite impressive.   As you might expect, the 4.4% net income decline reported by Vtech Holdings doesn't bode well with us.  So, there might be some other aspects that could explain this.  For example, it could be that the company has a high payout ratio or the business has allocated capital poorly, for instance.     So, as a next step, we compared Vtech Holdings' performance against the industry and were disappointed to discover that while the company has been shrinking its earnings, the industry has been growing its earnings at a rate of 9.0% over the last few years.   SEHK:303 Past Earnings Growth November 13th 2024 The basis for attaching value to a company is, to a great extent, tied to its earnings growth.  The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in.  Doing so will help them establish if the stock's future looks promising or ominous.    One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Vtech Holdings is trading on a high P/E or a low P/E, relative to its industry.    Is Vtech Holdings Efficiently Re-investing Its Profits?   Vtech Holdings' declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 99% (or a retention ratio of 1.4%).    With only very little left to reinvest into the business, growth in earnings is far from likely.      Our risks dashboard should have the 2 risks we have identified for Vtech Holdings.       Moreover, Vtech Holdings has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth.      Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 98%.   Regardless, the future ROE for Vtech Holdings is predicted to rise to 32% despite there being not much change expected in its payout ratio.      Conclusion    On the whole, we feel that the performance shown by Vtech Holdings can be open to many interpretations.      In spite of the high ROE, the company has failed to see growth in its earnings due to it paying out most of its profits as dividend, with almost nothing left to invest into its own business.      Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals.   You can do your own research on Vtech Holdings and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows. New: Manage All Your Stock Portfolios in One PlaceWe've created the ultimate portfolio companion for stock investors, and it's free.• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocksTry a Demo Portfolio for FreeHave 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. 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