Should You Be Worried About SATS Ltd.'s (SGX:S58) 2.4% Return On Equity?

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Should You Be Worried About SATS Ltd.'s (SGX:S58) 2.4% Return On Equity?

Simply Wall St.10-11

While some investors are already well versed in financial metrics (hat tip), this article is for those who would like to learn about Return On Equity (ROE) and why it is important. We'll use ROE to ...

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AngHian
·10-11
A wolf in sheep's skin is what this is all about. Why use SATS as example, while pretending that this is a general discussion about ROE? After having bought low and off-loaded the shares too early at higher price and can't bear to see the price go higher?
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We'll use ROE to ...</p>\n\n<a href=\"https://finance.yahoo.com/news/worried-sats-ltd-sgx-s58-221005926.html\">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":"ROE","symbol_name":"ASTORIA US QUALITY KINGS ETF","start_time":0,"source_url":"https://finance.yahoo.com/news/worried-sats-ltd-sgx-s58-221005926.html","article_id":"2474705081","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/YBqfr.0wiNe3u7_FPI8ehA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/8a6e110a31c6069d708d7bc160393109"],"rights":{"source":"yahoofinance_sg","url":"https://finance.yahoo.com/news/worried-sats-ltd-sgx-s58-221005926.html","rn_cache_url":null,"customStyle":"","selectors":"article, body","filters":"","directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2474705081","pubTimestamp":1728598205,"sourceInfo":{"source_id":"yahoofinance_sg","name":"Yahoo Finance"},"weMediaInfo":null,"summary":"While some investors are already well versed in financial metrics , this article is for those who would like to learn about Return On Equity  and why it is important. We'll use ROE to examine SATS Ltd. , by way of a worked example.Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.Return on Equity = Net Profit  ÷ Shareholders' Equity. So, based on the above formula, the ROE for SATS is:. Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. In our books, the highest quality companies have high return on equity, despite low debt. 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We'll use ROE to examine SATS Ltd. (SGX:S58), by way of a worked example. \n Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders. \n View our latest analysis for SATS \n How Do You Calculate Return On Equity? \n ROE can be calculated by using the formula: \n Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity \nSo, based on the above formula, the ROE for SATS is:\n2.4% = S$61m ÷ S$2.6b (Based on the trailing twelve months to March 2024).\n The 'return' is the yearly profit. That means that for every SGD1 worth of shareholders' equity, the company generated SGD0.02 in profit. \n Does SATS Have A Good ROE? \n By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. Importantly, this is far from a perfect measure, because companies differ significantly within the same industry classification. As shown in the graphic below, SATS has a lower ROE than the average (8.3%) in the Infrastructure industry classification. \n\n\n\n  SGX:S58 Return on Equity October 10th 2024\n \n\n That's not what we like to see. Although, we think that a lower ROE could still mean that a company has the opportunity to better its returns with the use of leverage, provided its existing debt levels are low. A high debt company having a low ROE is a different story altogether and a risky investment in our books. \n Why You Should Consider Debt When Looking At ROE \n Virtually all companies need money to invest in the business, to grow profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first and second cases, the ROE will reflect this use of cash for investment in the business. In the latter case, the use of debt will improve the returns, but will not change the equity. Thus the use of debt can improve ROE, albeit along with extra risk in the case of stormy weather, metaphorically speaking. \n SATS' Debt And Its 2.4% ROE \n SATS does use a high amount of debt to increase returns. It has a debt to equity ratio of 1.06. The combination of a rather low ROE and significant use of debt is not particularly appealing. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it. \n Summary \n Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. In our books, the highest quality companies have high return on equity, despite low debt. If two companies have around the same level of debt to equity, and one has a higher ROE, I'd generally prefer the one with higher ROE. \n But when a business is high quality, the market often bids it up to a price that reflects this. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. So I think it may be worth checking this free report on analyst forecasts for the company. \n Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this  free list of interesting companies. \nHave 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.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":358884795641904,"gmtCreate":1728626358609,"gmtModify":1728646600170,"author":{"id":"3585447621705948","authorId":"3585447621705948","name":"AngHian","avatar":"https://community-static.tradeup.com/news/309f97b1ba05f7ced5f9e87871f280c4","vip":1,"crmLevel":6,"crmLevelSwitch":0,"authorIdStr":"3585447621705948","idStr":"3585447621705948"},"htmlText":"A wolf in sheep's skin is what this is all about. Why use SATS as example, while&nbsp;pretending that this is a general discussion about ROE? After having bought low and off-loaded the shares too early&nbsp;at higher price and can't bear to see the price go higher?","listText":"A wolf in sheep's skin is what this is all about. Why use SATS as example, while&nbsp;pretending that this is a general discussion about ROE? After having bought low and off-loaded the shares too early&nbsp;at higher price and can't bear to see the price go higher?","text":"A wolf in sheep's skin is what this is all about. Why use SATS as example, while pretending that this is a general discussion about ROE? After having bought low and off-loaded the shares too early at higher price and can't bear to see the price go higher?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/358884795641904","repostId":2474705081,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":1,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}