Is Jin Medical International Ltd.'s (NASDAQ:ZJYL) Recent Stock Performance Influenced By Its Fundamentals In Any Way?

editorial-team@simplywallst.com (Simply Wall St)

Mon, Apr 28, 2025, 5:58 AM 4 min read

Jin Medical International (NASDAQ:ZJYL) has had a great run on the share market with its stock up by a significant 28% over the last month. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Jin Medical International's ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How To 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 Jin Medical International is:

12% = US$3.4m ÷ US$29m (Based on the trailing twelve months to September 2024).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.12 in profit.

See our latest analysis for Jin Medical International

What Is The Relationship Between ROE And Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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 all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

Jin Medical International's Earnings Growth And 12% ROE

At first glance, Jin Medical International seems to have a decent ROE. Even when compared to the industry average of 13% the company's ROE looks quite decent. Jin Medical International's decent returns aren't reflected in Jin Medical International'smediocre five year net income growth average of 2.6%. 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.

We then compared Jin Medical International's net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 15% in the same 5-year period, which is a bit concerning.

past-earnings-growth — NasdaqCM:ZJYL Past Earnings Growth April 28th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Jin Medical International's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Jin Medical International Efficiently Re-investing Its Profits?

Jin Medical International doesn't pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. However, there's only been very little earnings growth to show for it. Therefore, there might be some other reasons to explain the lack in that respect. For example, the business could be in decline.

Summary

Overall, we feel that Jin Medical International certainly does have some positive factors to consider. Yet, the low earnings growth is a bit concerning, especially given that the company has a high rate of return and is reinvesting ma huge portion of its profits. By the looks of it, there could be some other factors, not necessarily in control of the business, that's preventing growth. 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. To know the 2 risks we have identified for Jin Medical International visit our risks dashboard for free.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.