Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. We aim to bring you long-term focused research analysis driven by fundamental data. So you may wish to see this free collection of other companies that have high ROE and low debt. Of course Automotive Properties Real Estate Investment Trust may not be the best stock to buy. So I think it may be worth checking this free report on analyst forecasts for the company. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too. Having said that, while ROE is a useful indicator of business quality, you'll have to look at a whole range of factors to determine the right price to buy a stock. All else being equal, a higher ROE is better. A company that can achieve a high return on equity without debt could be considered a high quality business. Return on equity is one way we can compare the business quality of different companies. Debt increases risk and reduces options for the company in the future, so you generally want to see some good returns from using it. The combination of a rather low ROE and significant use of debt is not particularly appealing. Combining Automotive Properties Real Estate Investment Trust's Debt And Its 2.9% Return On EquityĪutomotive Properties Real Estate Investment Trust does use a significant amount of debt to increase returns. That will make the ROE look better than if no debt was used. In the latter case, the debt used for growth will improve returns, but won't affect the total equity. In the first two cases, the ROE will capture this use of capital to grow. That cash can come from issuing shares, retained earnings, or debt. Virtually all companies need money to invest in the business, to grow profits. Nonetheless, it might be wise to check if insiders have been selling. We prefer it when the ROE of a company is above the industry average, but it's not the be-all and end-all if it is lower. TSX:APR.UN Past Revenue and Net Income, July 3rd 2019 If you look at the image below, you can see Automotive Properties Real Estate Investment Trust has a lower ROE than the average (9.4%) in the REITs industry classification. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. Does Automotive Properties Real Estate Investment Trust Have A Good Return On Equity? That means it can be interesting to compare the ROE of different companies. So, all else being equal, a high ROE is better than a low one. That means that the higher the ROE, the more profitable the company is. Return on Equity measures a company's profitability against the profit it has kept for the business (plus any capital injections). You can calculate shareholders' equity by subtracting the company's total liabilities from its total assets. It is all the money paid into the company from shareholders, plus any earnings retained. Most know that net profit is the total earnings after all expenses, but the concept of shareholders' equity is a little more complicated. Or for Automotive Properties Real Estate Investment Trust:Ģ.9% = CA$6.8m ÷ CA$230m (Based on the trailing twelve months to March 2019.) Return on Equity = Net Profit ÷ Shareholders' Equity View our latest analysis for Automotive Properties Real Estate Investment Trust How Do I Calculate ROE? That means that for every CA$1 worth of shareholders' equity, it generated CA$0.029 in profit. To keep the lesson grounded in practicality, we'll use ROE to better understand Automotive Properties Real Estate Investment Trust ( TSE:APR.UN).Īutomotive Properties Real Estate Investment Trust has a ROE of 2.9%, based on the last twelve months. 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. Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
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