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China East Education Holdings Limited's (HKG:667) Stock is Soaring But Financials Seem Inconsistent: Will The Uptrend Continue?

Simply Wall St · 6d ago

China East Education Holdings' (HKG:667) stock is up by a considerable 13% over the past week. However, we wonder if the company's inconsistent financials would have any adverse impact on the current share price momentum. In this article, we decided to focus on China East Education Holdings' ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

The formula for return on equity is:

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

So, based on the above formula, the ROE for China East Education Holdings is:

11% = CN¥644m ÷ CN¥5.8b (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. That means that for every HK$1 worth of shareholders' equity, the company generated HK$0.11 in profit.

Check out our latest analysis for China East Education 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. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

China East Education Holdings' Earnings Growth And 11% ROE

At first glance, China East Education Holdings seems to have a decent ROE. Even when compared to the industry average of 10% the company's ROE looks quite decent. China East Education Holdings' decent returns aren't reflected in China East Education Holdings'mediocre five year net income growth average of 4.2%. So, there could be some other factors at play that could be impacting the company's growth. For instance, the company pays out a huge portion of its earnings as dividends, or is faced with competitive pressures.

As a next step, we compared China East Education Holdings' net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 8.1% in the same period.

past-earnings-growth
SEHK:667 Past Earnings Growth February 15th 2026

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if China East Education Holdings is trading on a high P/E or a low P/E, relative to its industry.

Is China East Education Holdings Making Efficient Use Of Its Profits?

China East Education Holdings has a very high three-year median payout ratio of 117%suggesting that the company's shareholders are getting paid from more than just the company's income. This is indicative of risk. To know the 2 risks we have identified for China East Education Holdings visit our risks dashboard for free.

Moreover, China East Education Holdings has been paying dividends for six years, which is a considerable amount of time, 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 drop to 57% over the next three years. As a result, the expected drop in China East Education Holdings' payout ratio explains the anticipated rise in the company's future ROE to 16%, over the same period.

Conclusion

On the whole, we feel that the performance shown by China East Education Holdings can be open to many interpretations. In spite of the high ROE, the company has failed to see growth in its earnings due to it paying out most of its profits as dividend, with almost nothing left to invest into its own business. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. 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.