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Is Shandong Weigao Group Medical Polymer Company Limited's (HKG:1066) Stock Price Struggling As A Result Of Its Mixed Financials?

Simply Wall St · 5d ago

Shandong Weigao Group Medical Polymer (HKG:1066) has had a rough three months with its share price down 12%. It is possible that the markets have ignored the company's differing financials and decided to lean-in to the negative sentiment. Stock prices are usually driven by a company’s financial performance over the long term, and therefore we decided to pay more attention to the company's financial performance. Specifically, we decided to study Shandong Weigao Group Medical Polymer's ROE in this article.

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 simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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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 Shandong Weigao Group Medical Polymer is:

8.0% = CN¥2.1b ÷ CN¥26b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. That means that for every HK$1 worth of shareholders' equity, the company generated HK$0.08 in profit.

See our latest analysis for Shandong Weigao Group Medical Polymer

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. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. 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.

Shandong Weigao Group Medical Polymer's Earnings Growth And 8.0% ROE

At first glance, Shandong Weigao Group Medical Polymer's ROE doesn't look very promising. However, its ROE is similar to the industry average of 8.5%, so we won't completely dismiss the company. Having said that, Shandong Weigao Group Medical Polymer's net income growth over the past five years is more or less flat. Remember, the company's ROE is not particularly great to begin with. Hence, this provides some context to the flat earnings growth seen by the company.

As a next step, we compared Shandong Weigao Group Medical Polymer's net income growth with the industry and discovered that the industry saw an average growth of 14% in the same period.

past-earnings-growth
SEHK:1066 Past Earnings Growth January 7th 2026

Earnings growth is a huge factor in stock valuation. 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. If you're wondering about Shandong Weigao Group Medical Polymer's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Shandong Weigao Group Medical Polymer Making Efficient Use Of Its Profits?

Despite having a moderate three-year median payout ratio of 38% (meaning the company retains62% of profits) in the last three-year period, Shandong Weigao Group Medical Polymer's earnings growth was more or les flat. So there might be other factors at play here which could potentially be hampering growth. For example, the business has faced some headwinds.

Moreover, Shandong Weigao Group Medical Polymer has been paying dividends for at least ten years or more suggesting that management must have perceived that the shareholders prefer dividends over earnings growth. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 50% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Summary

On the whole, we feel that the performance shown by Shandong Weigao Group Medical Polymer can be open to many interpretations. Even though it appears to be retaining most of its profits, given the low ROE, investors may not be benefitting from all that reinvestment after all. The low earnings growth suggests our theory correct. That being so, the latest industry analyst forecasts show that the analysts are expecting to see a huge improvement in the company's earnings growth rate. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.