Should We Be Delighted With Nordstrom, Inc.'s (NYSE:JWN) ROE Of 62%?
Should We Be Delighted With Nordstrom, Inc.'s (NYSE:JWN) ROE Of 62%?
One of the best investments we can make is in our own knowledge and skill set. With that in mind, this article will work through how we can use Return On Equity (ROE) to better understand a business. To keep the lesson grounded in practicality, we'll use ROE to better understand Nordstrom, Inc. (NYSE:JWN).
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
See our latest analysis for Nordstrom
How To Calculate Return On Equity?
The formula for return on equity is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Nordstrom is:
62% = US$364m ÷ US$589m (Based on the trailing twelve months to April 2022).
The 'return' refers to a company's earnings over the last year. So, this means that for every $1 of its shareholder's investments, the company generates a profit of $0.62.
Does Nordstrom Have A Good ROE?
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, Nordstrom has a superior ROE than the average (31%) in the Multiline Retail industry.
NYSE:JWN Return on Equity August 12th 2022That's what we like to see. Bear in mind, a high ROE doesn't always mean superior financial performance. Aside from changes in net income, a high ROE can also be the outcome of high debt relative to equity, which indicates risk. To know the 2 risks we have identified for Nordstrom visit our risks dashboard for free.
How Does Debt Impact Return On Equity?
Most companies need money -- from somewhere -- to grow their profits. That cash can come from issuing shares, retained earnings, or debt. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders' equity. In this manner the use of debt will boost ROE, even though the core economics of the business stay the same.
Combining Nordstrom's Debt And Its 62% Return On Equity
We think Nordstrom uses a significant amount of debt to maximize its returns, as it has a significantly higher debt to equity ratio of 4.85. While its ROE is no doubt quite impressive, it could give a false impression about the company's returns given that its huge debt could be boosting those returns.
Summary
Return on equity is a useful indicator of the ability of a business to generate profits and return them to shareholders. Companies that can achieve high returns on equity without too much debt are generally of good quality. If two companies have the same ROE, then I would generally prefer the one with less debt.
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 you might want to take a peek at this data-rich interactive graph of forecasts for the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
我們能做的最好的投資之一就是我們自己的知識和技能。考慮到這一點,本文將討論如何使用股本回報率(ROE)來更好地瞭解企業。為了使課程立足於實踐,我們將使用淨資產收益率來更好地瞭解諾德斯特龍公司(紐約證券交易所代碼:JWN)。
股本回報率(ROE)是用來評估公司管理層利用公司資本效率的關鍵指標。簡而言之,它是用來評估一家公司相對於其權益資本的盈利能力。
查看我們對諾德斯特龍的最新分析
如何計算股本回報率?
這個股本回報率公式是:
股本回報率=(持續經營的)淨利潤?股東權益
因此,根據上述公式,諾德斯特龍的淨資產收益率為:
62%=3.64億美元×5.89億美元(基於截至2022年4月的12個月的往績)。
“回報”指的是一家公司過去一年的收益。因此,這意味着股東每投資1美元,公司就會產生0.62美元的利潤。
諾德斯特龍的淨資產收益率好嗎?
可以説,評估公司淨資產收益率最簡單的方法是將其與所在行業的平均水平進行比較。這種方法的侷限性是,一些公司與其他公司有很大的不同,甚至在相同的行業分類中也是如此。令人高興的是,Nordstrom的淨資產收益率(ROE)高於多線零售行業的平均水平(31%)。
紐約證券交易所:JWN股本回報率2022年8月12日這就是我們希望看到的。請記住,高淨資產收益率並不總是意味着更好的財務表現。除了淨利潤的變化外,高淨資產收益率也可能是高負債相對於股本的結果,這表明存在風險。要了解我們為諾德斯特龍確定的兩個風險,請免費訪問我們的風險儀錶板。
債務對股本回報率有何影響?
大多數公司都需要資金--從某個地方--來增加利潤。這些現金可以來自發行股票、留存收益或債務。在前兩種情況下,淨資產收益率將抓住這種資本增長的用途。在後一種情況下,增長所需的債務將提高回報,但不會影響股東權益。在這種情況下,債務的使用將提高淨資產收益率,即使企業的核心經濟保持不變。
結合諾德斯特龍的債務和62%的股本回報率
我們認為諾德斯特龍使用了大量的債務來最大化其回報,因為它的債務與股本比率要高得多,為4.85。雖然它的淨資產收益率無疑令人印象深刻,但它可能會給人一種關於公司回報的錯誤印象,因為它的鉅額債務可能會提高這些回報。
摘要
股本回報率是衡量一家企業產生利潤並將其返還給股東的能力的有用指標。能夠在沒有太多債務的情況下實現高股本回報率的公司通常質量良好。如果兩家公司的淨資產收益率相同,那麼我通常會傾向於債務較少的那一家。
但當一項業務是高質量的時,市場往往會將其抬高到反映這一點的價格。重要的是要考慮其他因素,比如未來的利潤增長,以及未來需要多少投資。因此,你可能想看看這張數據豐富的公司預測互動圖表。
當然了,如果你把目光投向別處,你可能會發現這是一筆很棒的投資。所以讓我們來看看這個免費有趣的公司名單。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
譯文內容由第三人軟體翻譯。
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