Is Fairplay Properties REIT's (BUL:FPP) Stock's Recent Performance Being Led By Its Attractive Financial Prospects?

Fairplay Properties REIT's (BUL:FPP) stock is up by a considerable 16% over the past week. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. Specifically, we decided to study Fairplay Properties REIT's ROE in this article.

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 short, ROE shows the profit each dollar generates with respect to its shareholder investments.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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 Fairplay Properties REIT is:

15% = лв19m ÷ лв125m (Based on the trailing twelve months to September 2025).

The 'return' is the yearly profit. Another way to think of that is that for every BGN1 worth of equity, the company was able to earn BGN0.15 in profit.

View our latest analysis for Fairplay Properties REIT

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.

A Side By Side comparison of Fairplay Properties REIT's Earnings Growth And 15% ROE

At first glance, Fairplay Properties REIT seems to have a decent ROE. On comparing with the average industry ROE of 4.3% the company's ROE looks pretty remarkable. This probably laid the ground for Fairplay Properties REIT's significant 63% net income growth seen over the past five years. We reckon that there could also be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Fairplay Properties REIT's growth is quite high when compared to the industry average growth of 19% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). 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 Fairplay Properties REIT is trading on a high P/E or a low P/E, relative to its industry.

Is Fairplay Properties REIT Making Efficient Use Of Its Profits?

Conclusion

In total, we are pretty happy with Fairplay Properties REIT's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. Unsurprisingly, this has led to an impressive earnings growth. If the company continues to grow its earnings the way it has, that could have a positive impact on its share price given how earnings per share influence long-term share prices. Let's not forget, business risk is also one of the factors that affects the price of the stock. So this is also an important area that investors need to pay attention to before making a decision on any business. To know the 4 risks we have identified for Fairplay Properties REIT visit our risks dashboard for free.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.