Is Dubai Insurance Company (P.S.C.)'s (DFM:DIN) Recent Stock Performance Influenced By Its Fundamentals In Any Way?

Dubai Insurance Company (P.S.C.) (DFM:DIN) has had a great run on the share market with its stock up by a significant 21% over the last three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company's key financial indicators today to determine if they have any role to play in the recent price movement. In this article, we decided to focus on Dubai Insurance Company (P.S.C.)'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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How Do You Calculate Return On Equity?

The formula for ROE is:

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

So, based on the above formula, the ROE for Dubai Insurance Company (P.S.C.) is:

14% = د.إ135m ÷ د.إ976m (Based on the trailing twelve months to March 2025).

The 'return' is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each AED1 of shareholders' capital it has, the company made AED0.14 in profit.

View our latest analysis for Dubai Insurance Company (P.S.C.)

Why Is ROE Important For 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. 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.

Dubai Insurance Company (P.S.C.)'s Earnings Growth And 14% ROE

It is hard to argue that Dubai Insurance Company (P.S.C.)'s ROE is much good in and of itself. However, the fact that it is higher than the industry average of 9.8% makes us a bit more interested. Particularly, the substantial 22% net income growth seen by Dubai Insurance Company (P.S.C.) over the past five years is impressive . That being said, the company does have a low ROE to begin with, just that its higher than the industry average. So there might well be other reasons for the earnings to grow. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.

As a next step, we compared Dubai Insurance Company (P.S.C.)'s net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 0.3%.

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. 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 Dubai Insurance Company (P.S.C.) is trading on a high P/E or a low P/E, relative to its industry.

Is Dubai Insurance Company (P.S.C.) Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 51% (implying that it keeps only 49% of profits) for Dubai Insurance Company (P.S.C.) suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Besides, Dubai Insurance Company (P.S.C.) has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders.

Summary

In total, it does look like Dubai Insurance Company (P.S.C.) has some positive aspects to its business. Especially the substantial growth in earnings backed by a decent ROE. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. So far, we've only made a quick discussion around the company's earnings growth. To gain further insights into Dubai Insurance Company (P.S.C.)'s past profit growth, check out this visualization of past earnings, revenue and cash flows.

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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.