Would Financials Be Able To Push International Holding Company PJSC's (ADX:IHC) Stock Prices Higher In The Near Future?

It is easy to overlook International Holding Company PJSC's (ADX:IHC) given its unimpressive and roughly flat price performance over the past three months. However, its worth giving the company a closer given that its key financial performance indicators aren't particularly bad and long-term financial health is usually what drive market prices. In this article, we decided to focus on International Holding Company PJSC'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. 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?

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 International Holding Company PJSC is:

9.4% = د.إ24b ÷ د.إ257b (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. So, this means that for every AED1 of its shareholder's investments, the company generates a profit of AED0.09.

View our latest analysis for International Holding Company PJSC

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. 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.

International Holding Company PJSC's Earnings Growth And 9.4% ROE

It is hard to argue that International Holding Company PJSC's ROE is much good in and of itself. Further, we noted that the company's ROE is similar to the industry average of 9.1%. However, the exceptional 35% net income growth seen by International Holding Company PJSC over the past five years is pretty remarkable. We reckon that there could also be other factors at play thats influencing the company's growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that International Holding Company PJSC's growth is quite high when compared to the industry average growth of 26% in the same period, which is great to see.

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. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about International Holding Company PJSC's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is International Holding Company PJSC Using Its Retained Earnings Effectively?

International Holding Company PJSC doesn't pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

Conclusion

Overall, we feel that International Holding Company PJSC certainly does have some positive factors to consider. 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 2 risks we have identified for International Holding Company PJSC by visiting our risks dashboard for free on our platform here.

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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.