MEEZA QSTP LLC (Public)'s (DSM:MEZA) Stock Is Rallying But Financials Look Ambiguous: Will The Momentum Continue?

MEEZA QSTP (Public)'s (DSM:MEZA) stock is up by a considerable 17% over the past three months. But the company's key financial indicators appear to be differing across the board and that makes us question whether or not the company's current share price momentum can be maintained. In this article, we decided to focus on MEEZA QSTP (Public)'s ROE.

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 Do You Calculate Return On Equity?

ROE 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 MEEZA QSTP (Public) is:

8.4% = ر.ق59m ÷ ر.ق702m (Based on the trailing twelve months to June 2025).

The 'return' is the income the business earned over the last year. Another way to think of that is that for every QAR1 worth of equity, the company was able to earn QAR0.08 in profit.

See our latest analysis for MEEZA QSTP (Public)

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.

A Side By Side comparison of MEEZA QSTP (Public)'s Earnings Growth And 8.4% ROE

As you can see, MEEZA QSTP (Public)'s ROE looks pretty weak. Even compared to the average industry ROE of 12%, the company's ROE is quite dismal. Although, we can see that MEEZA QSTP (Public) saw a modest net income growth of 9.7% over the past five years. We believe that there might be other aspects that are positively influencing the company's earnings growth. Such as - high earnings retention or an efficient management in place.

As a next step, we compared MEEZA QSTP (Public)'s net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 14% in the same 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. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is MEEZA QSTP (Public) fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is MEEZA QSTP (Public) Making Efficient Use Of Its Profits?

The high three-year median payout ratio of 87% (or a retention ratio of 13%) for MEEZA QSTP (Public) suggests that the company's growth wasn't really hampered despite it returning most of its income to its shareholders.

Along with seeing a growth in earnings, MEEZA QSTP (Public) only recently started paying dividends. Its quite possible that the company was looking to impress its shareholders. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 86%. Still, forecasts suggest that MEEZA QSTP (Public)'s future ROE will rise to 13% even though the the company's payout ratio is not expected to change by much.

Summary

In total, we're a bit ambivalent about MEEZA QSTP (Public)'s performance. While no doubt its earnings growth is pretty respectable, the low profit retention could mean that the company's earnings growth could have been higher, had it been paying reinvesting a higher portion of its profits. An improvement in its ROE could also help future earnings growth. Up till now, we've only made a short study of the company's growth data. So it may be worth checking this free detailed graph of MEEZA QSTP (Public)'s past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.

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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.