U.S. markets closed

# Did Cteh Inc. (HKG:1620) Use Debt To Deliver Its ROE Of 9.7%?

Many investors are still learning about the various metrics that can be useful when analysing a stock. This article is for those who would like to learn about Return On Equity (ROE). We'll use ROE to examine Cteh Inc. (HKG:1620), by way of a worked example.

Over the last twelve months Cteh has recorded a ROE of 9.7%. Another way to think of that is that for every HK\$1 worth of equity in the company, it was able to earn HK\$0.10.

View our latest analysis for Cteh

### How Do You Calculate ROE?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

Or for Cteh:

9.7% = HK\$16m ÷ HK\$165m (Based on the trailing twelve months to June 2019.)

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

### What Does Return On Equity Mean?

ROE looks at the amount a company earns relative to the money it has kept within the business. The 'return' is the profit over the last twelve months. That means that the higher the ROE, the more profitable the company is. So, as a general rule, a high ROE is a good thing. Clearly, then, one can use ROE to compare different companies.

### Does Cteh Have A Good ROE?

One simple way to determine if a company has a good return on equity is to compare it to the average for its industry. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification. You can see in the graphic below that Cteh has an ROE that is fairly close to the average for the Hospitality industry (8.3%).

That isn't amazing, but it is respectable. ROE can give us a view about company quality, but many investors also look to other factors, such as whether there are insiders buying shares. If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

### How Does Debt Impact Return On Equity?

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.

### Cteh's Debt And Its 9.7% ROE

Shareholders will be pleased to learn that Cteh has not one iota of net debt! Its ROE already suggests it is a good business, but the fact it has achieved this -- and doesn't borrowings -- makes it worthy of further consideration, in my view. After all, when a company has a strong balance sheet, it can often find ways to invest in growth, even if it takes some time.

### In Summary

Return on equity is one way we can compare the business quality of different companies. A company that can achieve a high return on equity without debt could be considered a high quality business. All else being equal, a higher ROE is better.

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. It is important to consider other factors, such as future profit growth -- and how much investment is required going forward. You can see how the company has grow in the past by looking at this FREE detailed graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

• U.S.
Yahoo Finance

### Stock market news live: Stock futures sink as coronavirus cases top 700,000 globally

Stocks futures kicked off the overnight session lower as market participants continued tracking the spread of the coronavirus and the daily life disruptions it has invoked around the world. On Sunday, President Donald Trump said during a news conference that he was extending guidelines for citizens to remain socially distanced through April 30. Earlier, Trump had sought to reopen businesses by Easter in mid-April.

TipRanks

### Goldman Sachs Picks 2 Stocks to Buy (and 1 to Sell)

Bellini reiterates a Buy rating on WDAY, but the price target is slashed from \$223 to \$158 on account of “contraction in peer multiples and increased macroeconomic risk. Expect returns in the shape of 16%, should Bellini's forecast play out in the coming months. To watch Bellini's track record, click here) Looking at the consensus breakdown, 13 Buys, 6 Holds and 1 Sell coalesce into a Moderate Buy consensus rating.

• World
Bloomberg

### Stocks Drop With Oil; Dollar Halts Four-Day Slide: Markets Wrap

The latest news on the coronavirus underlined how, while policy makers the world over have dramatically stepped up their efforts to prevent the health crisis from becoming a financial one, the health situation itself does continue to deteriorate. The top American infectious disease expert said deaths from the coronavirus in the world's largest economy may reach 200,000. “The assumption that we can turn a switch in a month or two and everything is going to be okay is a faulty opinion,” David Kotok, chief investment officer at Cumberland Advisors Inc., told Bloomberg TV.

Bloomberg

### Oil Plummets to 17-Year Low as Broken Market Drowns in Crude

Physical oil markets are struggling to store fuel, hit by a double whammy of virus restrictions eroding demand and a damaging war for market share between Saudi Arabia and Russia that has prices on track for the worst quarter on record. Russia also doubled down, with Deputy Energy Minister Pavel Sorokin saying oil at \$25 a barrel is unpleasant, but not a catastrophe for the nation's producers. “Demand concerns are critical but well known, what really took the market down were the signals we got from Saudi Arabia and Russia that they intend to continue their current path,” said Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia.

MarketWatch

### You can be ‘practically stealing’ quality stocks now, according to Jefferies

Investors are trying to get ahead of an eventual turnaround for the stock market, even as the coronavirus spreads further across the U.S. Analysts at Jefferies have published a list of 47 stocks that they believe have “strong fundamentals” and attractive valuations, with opportunities created by “indiscriminate selling” over the past month. The largest of the recommended companies are listed below. Warnings Before getting to the list of “best stock ideas” from Jefferies, a number of warnings are in order: • It's too early to call a stock market bottom — it's a fool's errand.

MarketWatch

### These are the 20 stocks corporate insiders have been buying most amid the coronavirus-induced market selloff

Throughout these topsy-turvy times of scary health news, city lockdowns and daily market moves of 5% or more in both directions, there's been one comforting constant. Corporate insiders — executives and directors who buy shares in their own company — are loving this pullback. Since the S&P 500 index (SPX) Dow Jones Industrial Average (DJIA) and Nasdaq Composite Index (COMP) really began falling apart after March 5, insiders have been heavily buying all the areas that will supposedly get hit the hardest by this coronavirus and the COVID-19 illness it causes.

### Dow Jones Futures: Can Stock Market Rally Survive Amid Coronavirus Crisis? Amazon, AMD Lead Six Stocks To Watch

Dow Jones futures fell Sunday evening, along with S&P 500 futures and Nasdaq futures. A strong stock market rally attempt began last week, despite Friday's pullback. A \$2 trillion stimulus package should help, but the coronavirus recession is just getting underway.

• U.S.
Meredith Videos

### Dr. Fauci Says Coronavirus Deaths in U.S. Could Top 100,000

The U.S. government's foremost infection disease expert says the United States could experience more than 100,000 deaths and millions of infections from the coronavirus pandemic.

MarketWatch

### Coronavirus claims the life of Jefferies Group CFO Peg Broadbent

The coronavirus pandemic hit close to home for many on Wall Street on Sunday morning with word of the passing of Peg Broadbent, CFO at Jefferies Group (JEF) , at the age of 56. We are heartbroken and grieve that our friend and colleague, Peg Broadbent, has passed away from coronavirus complications,” Jefferies Chief Executive Officer Rich Handler and President Rich Friedman said in a joint statement. The Financial Times reported that Broadbent, the first senior Wall Street figure known to die from the disease, was in good health prior to his coronavirus diagnosis, Peg, “a much-loved and respected leader” is credited with helping to double the size of the company after having been hired in 20...

MarketWatch

### Getting crushed in this market? One look at Warren Buffett’s portfolio and you might feel a lot better about yours

Warren Buffett said earlier this month that he hadn't seen anything like the coronavirus pandemic. A couple of weeks later, and it's only gotten more dire as infections mount around the world and the stock market continues to spin out of control in both directions. “While Buffett is well known for weathering the worst market downturns and coming out stronger, the last several weeks have been just as painful on his portfolio as it has on the broader market,” Bespoke explained in a post noting that the average stock in his top holdings is off 37%.

### Abbott Labs releases coronavirus test system that has results in 5 minutes

Abbott Laboratories said it has received emergency-use authorization from the U.S. Food and Drug Administration for its device that can render positive results for the coronavirus in five minutes. The Abbott Park, Illinois-based pharmaceutical company (NYSE: ABT) said its molecular point-of-care test for novel coronavirus is the fastest test available and can deliver negative results in 13 minutes. The test doesn't have to be administered in a hospital, Abbott said, but can be used in healthcare settings such as physicians' offices and urgent care clinics, as well as hospital emergency departments.

Bloomberg

### U.S. Stock Futures Tumble With Virus Spread Stoking Volatility

Contacts on the S&P 500 expiring in June fell 2% to 2,472 as of 6:59 p.m. in New York, paring a drop that exceeded 3% in the first minutes. The S&P 500 still managed to end the week with a 10% gain, its biggest in 11 years, boosted by a historic three-day rally. Dramatic swings have been the rule in global markets for five weeks as investors tried to price in an outbreak that has shut down economies, put millions out of work and made it all but certain corporate earnings will drop.

• U.S.
Bloomberg

### Passengers on ‘Death Ship’ Plead for Rescue as Virus Strikes

For passengers on a Holland America Line cruise ship, a fun-filled voyage on the luxury liner is quickly turning into a nightmare with deteriorating conditions on board and fears of a full-blown coronavirus outbreak after four travelers died and two others were infected. “We are stuck on this death ship,” said Yadira Garza, who is on board with her newly-wed husband. Passengers on the Zaandam, currently off the coast of Panama, say they are desperate to get off the liner after Chile wouldn't allow the vessel to dock.

Associated Press Videos

### Honolulu comes to standstill amid virus outbreak

Honolulu came to an eerie standstill this week as the coronavirus pandemic spread throughout the islands. Hawaii officials effectively flipped the switch on the state's tourism-fueled economic engine in a bid to slow the spread of the virus. (March 29)

• News
Financial Times

### Recession pushes Hong Kong shoppers to sell their luxury goods

Rachel, a 30-year-old flight attendant in Hong Kong, used to carry a suitcase back home packed with luxury goods that she purchased on every trip to Europe. Now her full-time job is also at risk as the coronavirus outbreak has grounded flights, and her employer — like many other airlines — has asked all staff to take unpaid leave. This leaves Rachel, who requested that her full name not be used, no choice but to sell part of her luxury collection for some quick cash.

MarketWatch

### Man who scored big wins during the 2008 financial crisis says the stock market could be ‘near a bottom’ if U.S. gets a coronavirus recovery plan

Hedge-fund manager David Tepper says there is nothing wrong with “nibbling” at stocks that have experienced a brutal selloff in the past month, amid growing fears centered on the economic impact of the coronavirus pandemic. However, the star fund manager and billionaire says that U.S. lawmakers and the Trump administration need to act quickly to stabilize the economy and mitigate the damage from the deadly pathogen. There's nothing wrong with nibbling here,” the founder of Appaloosa Management said during a phone interview with CNBC on Monday, referring to stocks that have fallen at an unprecedented rate, as business activity across the globe shutters in order to contain the illness, COVID-1...

MarketWatch

### If you do this now, you might be able to double your retirement portfolio

The coronavirus crisis has created an extraordinary buying opportunity in emerging market stocks for anyone hoping to save for their retirement, say two independent investment houses. Buy a broad portfolio of inexpensive “value” stocks in developing markets such as China, South Korea, Russia, Brazil, India and you've got a good chance of doubling your money or better over the next five to seven years, say number crunchers at investment advisory firm Research Affiliates in Newport Beach, Calif., and at the blue chip money managers GMO in Boston. “Value” stocks are those that are inexpensive in relation to business fundamentals such as company revenues, assets and earnings.

Simply Wall St.

### Do You Like Abbott Laboratories (NYSE:ABT) At This P/E Ratio?

How Do I Calculate Abbott Laboratories's Price To Earnings Ratio? The formula for price to earnings is: Price to Earnings Ratio = Price per Share ÷ Earnings per Share (EPS) Or for Abbott Laboratories: P/E of 35.96 = \$74.560 ÷ \$2.074 (Based on the trailing twelve months to December 2019. Is A High Price-to-Earnings Ratio Good?

Reuters

### Crude oil futures slide as pandemic darkens demand outlook

U.S. West Texas Intermediate (WTI) crude futures hit a low of \$19.92 in early trading and last traded down 5.2%, or \$1.12, at \$20.39 a barrel as of 2332 GMT, while Brent futures fell 5.6%, or \$1.40, to \$23.53 a barrel. The oil markets are enduring a twin shock of demand destruction caused by the coronavirus pandemic and the Saudi-Russia price war that is flooding markets with extra supply. "OPEC, Saudi Arabia and Russia could mend their differences, but there's not that much OPEC could do....The demand shock from COVID-19 is just too big," said National Australia Bank's head of commodities research, Lachlan Shaw.

MoneyWise

### How Soon Will You Get Your Coronavirus Stimulus Check?

The IRS will base your payment on the most recent tax return you filed. If you haven't filed your 2019 return yet — and you now have until July 15 to do that — the tax agency will pull up your 2018 filing. If you earned too much during 2018 to receive a payment but would qualify based on last year's income, because it was lower, you'll want to file your 2019 return quickly.

Reuters

### Asia shares suffer fresh spill as virus damage deepens

Asian shares slid on Monday and oil prices took another tumble as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies. "We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic's reach and the damage related to necessary containment policies has increased," said JPMorgan economist Bruce Kasman. They now predict global GDP could fall at a 10.5% annualized rate in the first half of the year.

Benzinga

### Barron's Picks And Pans: Tech Picks, SoftBank, REITs, Tesla And More

This weekend's Barron's offers 25 tech stock picks for a coronavirus world. Other featured articles look at whether drug makers should be more coronavirus-focused, stocks to buy for the long run and which dividends are safer. Also, the prospects for a Japanese conglomerate, the top electric vehicle maker, real estate investment trusts and more.

MarketWatch

### The Fed is going to buy ETFs. What does it mean?

The Federal Reserve on Monday announced a fresh round of stimulus designed to calm markets and buffer the hit to the economy from the coronavirus pandemic. Among other steps, the Fed said it would buy exchange-traded funds that track the corporate bond market, a first for the U.S. central bank. “This will provide much-needed liquidity to the bond market and to ETFs,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.