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Cloud Factory Technology Holdings Limited's (HKG:2512) Stock On An Uptrend: Could Fundamentals Be Driving The Momentum?

Simply Wall St · 12/31/2025 22:47

Cloud Factory Technology Holdings' (HKG:2512) stock is up by a considerable 19% over the past week. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. In this article, we decided to focus on Cloud Factory Technology Holdings' ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How Is ROE Calculated?

Return on equity 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 Cloud Factory Technology Holdings is:

3.5% = CN¥15m ÷ CN¥419m (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every HK$1 worth of equity, the company was able to earn HK$0.04 in profit.

See our latest analysis for Cloud Factory Technology Holdings

What Has ROE Got To Do With Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Cloud Factory Technology Holdings' Earnings Growth And 3.5% ROE

It is hard to argue that Cloud Factory Technology Holdings' ROE is much good in and of itself. Even when compared to the industry average of 5.6%, the ROE figure is pretty disappointing. Although, we can see that Cloud Factory Technology Holdings saw a modest net income growth of 6.3% over the past five years. Therefore, the growth in earnings could probably have been caused by other variables. Such as - high earnings retention or an efficient management in place.

When you consider the fact that the industry earnings have shrunk at a rate of 13% in the same 5-year period, the company's net income growth is pretty remarkable.

past-earnings-growth
SEHK:2512 Past Earnings Growth December 31st 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is Cloud Factory Technology Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Cloud Factory Technology Holdings Efficiently Re-investing Its Profits?

Given that Cloud Factory Technology Holdings doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Summary

On the whole, we do feel that Cloud Factory Technology Holdings has some positive attributes. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. While we won't completely dismiss the company, what we would do, is try to ascertain how risky the business is to make a more informed decision around the company. You can see the 1 risk we have identified for Cloud Factory Technology Holdings by visiting our risks dashboard for free on our platform here.