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With An ROE Of 17.61%, Has Hebron Technology Co Ltd.’s (NASDAQ:HEBT) Management Done Well?

Ashwin Virk

Hebron Technology Co Ltd. (NASDAQ:HEBT) delivered an ROE of 17.61% over the past 12 months, which is an impressive feat relative to its industry average of 11.45% during the same period. On the surface, this looks fantastic since we know that HEBT has made large profits from little equity capital; however, ROE doesn’t tell us if management have borrowed heavily to make this happen. We’ll take a closer look today at factors like financial leverage to determine whether HEBT’s ROE is actually sustainable. See our latest analysis for Hebron Technology

Breaking down Return on Equity


Return on Equity = Net Profit ÷ Shareholders Equity

ROE is measured against cost of equity in order to determine the efficiency of Hebron Technology’s equity capital deployed. Its cost of equity is 4.85%. Since Hebron Technology’s return covers its cost in excess of 12.75%, its use of equity capital is efficient and likely to be sustainable. Simply put, Hebron Technology pays less for its capital than what it generates in return. ROE can be split up into three useful ratios: net profit margin, asset turnover, and financial leverage. This is called the Dupont Formula:

Dupont Formula

ROE = profit margin × asset turnover × financial leverage


ROE = annual net profit ÷ shareholders’ equity

NasdaqCM:HEBT Last Perf May 25th 18

Basically, profit margin measures how much of revenue trickles down into earnings which illustrates how efficient the business is with its cost management. Asset turnover shows how much revenue Hebron Technology can generate with its current asset base. The most interesting ratio, and reflective of sustainability of its ROE, is financial leverage. Since ROE can be inflated by excessive debt, we need to examine Hebron Technology’s debt-to-equity level. Currently the debt-to-equity ratio stands at a low 3.75%, which means its above-average ROE is driven by its ability to grow its profit without a significant debt burden.

NasdaqCM:HEBT Historical Debt May 25th 18

Next Steps:


For Hebron Technology, there are three important factors you should further research:

  2. Future Earnings: How does Hebron Technology’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hebron Technology? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

