Emirates Integrated Telecommunications Company PJSC's (DFM:DU) Stock Has Been Sliding But Fundamentals Look Strong: Is The Market Wrong?

Emirates Integrated Telecommunications Company PJSC (DFM:DU) has had a rough month with its share price down 12%. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Specifically, we decided to study Emirates Integrated Telecommunications Company PJSC's ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

Return on equity 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 Emirates Integrated Telecommunications Company PJSC is:

28% = د.إ2.8b ÷ د.إ9.8b (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. So, this means that for every AED1 of its shareholder's investments, the company generates a profit of AED0.28.

View our latest analysis for Emirates Integrated Telecommunications Company PJSC

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

A Side By Side comparison of Emirates Integrated Telecommunications Company PJSC's Earnings Growth And 28% ROE

To begin with, Emirates Integrated Telecommunications Company PJSC seems to have a respectable ROE. Especially when compared to the industry average of 11% the company's ROE looks pretty impressive. This probably laid the ground for Emirates Integrated Telecommunications Company PJSC's moderate 16% net income growth seen over the past five years.

We then compared Emirates Integrated Telecommunications Company PJSC's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 7.8% in the same 5-year period.

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. What is DU worth today? The intrinsic value infographic in our free research report helps visualize whether DU is currently mispriced by the market.

Is Emirates Integrated Telecommunications Company PJSC Making Efficient Use Of Its Profits?

The high three-year median payout ratio of 86% (or a retention ratio of 14%) for Emirates Integrated Telecommunications Company PJSC suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Additionally, Emirates Integrated Telecommunications Company PJSC has paid dividends over a period of at least ten years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 98% of its profits over the next three years. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 32%.

Conclusion

On the whole, we feel that Emirates Integrated Telecommunications Company PJSC's performance has been quite good. We are particularly impressed by the considerable earnings growth posted by the company, which was likely backed by its high ROE. While the company is paying out most of its earnings as dividends, it has been able to grow its earnings in spite of it, so that's probably a good sign. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. 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.

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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.