Should you be impressed with the ROE from K92 Mining Inc. (CVE: KNT)?

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<p class = "Canvas-Atom-Canvas-Text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Many investors learn something about the different metrics that This article is for those who want to learn more about Return On Equity (ROE), so to get the practical background, we use the return on investment to better understand K92 Mining Inc.CVE: KNT). "data-reactid =" 27 "> Many investors are still learning the various metrics that can help analyze a stock, and this article is for those who want to learn more about return on equity (ROE) in this practical lesson we use ROE to better understand K92 Mining Inc. (CVE: KNT).

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Our data show K92 Mining has a return on equity of 43% for the last year. Another possibility is that for every CA $ 1 worth of equity in the company, CA $ 0.43 was earned. "Data-reactid =" 28 "> Our data show K92 Mining has a return on equity of 43% for the last year. Another possibility is that CA $ 0.43 could be earned for every $ 1 of the company's equity.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " Check out our latest analysis for K92 mining "data-reactid =" 29 "> Check out our latest analysis for K92 mining

How do you calculate the return on equity?

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "The Formula for ROE is: "data-reactid =" 31 "> The Formula for ROE is:

Return on equity = net income (from continuing operations) ÷ equity

Or for K92 mining:

43% = $ 43 million ÷ $ 101 million (based on the last twelve months to September 2019)

Most people know that the net profit is the total after all expenses, but the concept of equity is a little more complicated. This is the capital paid in by the shareholders plus any retained earnings. The simplest way to calculate equity is to deduct the company's total liabilities from total assets.

What does ROE mean?

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – SM MB (0.8em) – SM" type = "text" content = "ROE measures the profitability of a company based on profit, that it retains The return is the amount that has been earned after taxes in the past twelve months, ie the higher the ROE, the more profitable the company is. A high ROE is better than a low one, It is clear that you can compare different companies with ROE. "Data-reactid =" 37 "> ROE measures a company's profitability based on the profit it retains and any external investments. The" return "is the amount that is earned after tax above that. That is, the higher the ROE , the more profitable the company is. A high ROE is better than a low one, So you can use the return on investment to compare different companies.

Does K92 Mining have a good return on equity?

Probably the easiest way to measure a company's return on investment is to compare it to the industry average. It is important that this is anything but a perfect measure, since the companies differ significantly within the same industry classification. Fortunately, K92 Mining has a superior ROE than the average company (11%) in the metal and mining industries.

TSXV: KNT Past Revenue and Net Income, January 3, 2020

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This is a good sign. I usually take a closer look when a company returns better than comparable companies in the industry. One data point to check is whether Insiders recently bought shares, "data-reactid =" 52 "> This is a good sign. I usually take a closer look when a company has a better return than industry peers. One data point to check is whether Insiders recently bought shares,

How does debt affect ROE?

Virtually all companies need money to invest in the business and make profits. This money can come from retained earnings, the issue of new shares (equity) or debts. In the first and second options, the ROE reflects this use of cash for growth. In the latter case, the use of debt will improve returns but will not change equity. Thus, the use of debt can improve ROE, although, metaphorically speaking, there is an additional risk in stormy weather.

K92 Mining's Debt and Its 43% ROE

While K92 Mining has some debt, with equity only 0.15, we would not say that the debt is excessive. The return on equity is very impressive. Given the low level of debt, this indicates a high quality of business. The economical use of debt to increase the return is often very good for the shareholders. However, this could affect the company's ability to take advantage of future opportunities.

The key to take away

The return on equity is a useful indicator of a company's ability to make profits and return them to shareholders. In my book, the companies with the highest quality have a high return on equity despite the low level of debt. In general, if two companies have the same ROE, I would prefer the one with less debt.

<p class = "Canvas-Atom Canvas-Text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "However, ROE is a useful indicator for the correct course There are a number of factors to consider when buying a stock, with earnings growth rates being particularly important compared to expectations reflected in the price of the stock, and I think it might be worth checking free Company analyst forecast reportEmagazine.credit-suisse.com/app/art…1007 & lang = DE Although ROE is a useful indicator of company quality, there are a number of factors you need to consider in order to get the right price to buy a stock to investigate. This is particularly important compared to the expectations reflected in the stock price, and I think it's worth checking free Company analyst forecast report.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Of course K92 mining may not be the best stock to buy, Maybe you want to see that free Collection of other companies with high ROE and low debt."data-reactid =" 64 "> Of course K92 mining may not be the best stock to buy, Maybe you want to see that free Collection of other companies with high ROE and low debt.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com, This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading."data-reactid =" 65 ">If you discover an error that justifies a correction, please contact the editorial team at editorial-team@simplywallst.com. This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Simply Wall St has no position in the stocks mentioned.

We strive to provide you with long-term, focused research analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Thank you for reading.