Can Park Ha Biological Technology Co., Ltd.'s (NASDAQ:PHH) ROE Continue To Surpass The Industry Average?

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. By way of learning-by-doing, we'll look at ROE to gain a better understanding of Park Ha Biological Technology Co., Ltd. (NASDAQ:PHH). Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Put another way, it reveals the company's success at turning shareholder investments into profits. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. How Do You Calculate Return On Equity? ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for Park Ha Biological Technology is:32% = US$479k ÷ US$1.5m (Based on the trailing twelve months to October 2024). 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 $0.32. View our latest analysis for Park Ha Biological Technology Does Park Ha Biological Technology Have A Good ROE? By comparing a company's ROE with its industry average, we can get a quick measure of how good it is. The limitation of this approach is that some companies are quite different from others, even within the same industry classification. As you can see in the graphic below, Park Ha Biological Technology has a higher ROE than the average (18%) in the Specialty Retail industry. NasdaqCM:PHH Return on Equity June 26th 2025 That's clearly a positive. However, bear in mind that a high ROE doesn’t necessarily indicate efficient profit generation. Especially when a firm uses high levels of debt to finance its debt which may boost its ROE but the high leverage puts the company at risk. Our risks dashboardshould have the 4 risks we have identified for Park Ha Biological Technology. 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. That will make the ROE look better than if no debt was used. Park Ha Biological Technology's Debt And Its 32% ROE One positive for shareholders is that Park Ha Biological Technology does not have any net debt! Its high ROE already points to a high quality business, but the lack of debt is a cherry on top. At the end of the day, when a company has zero debt, it is in a better position to take future growth opportunities. Conclusion Return on equity is one way we can compare its 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. But when a business is high quality, the market often bids it up to a price that reflects this. Profit growth rates, versus the expectations reflected in the price of the stock, are a particularly important to consider. So I think it may be worth checking this free this 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.