Has Ooredoo Q.P.S.C. (DSM:ORDS) Stock's Recent Performance Got Anything to Do With Its Financial Health?

Most readers would already know that Ooredoo Q.P.S.C's (DSM:ORDS) stock increased by 2.7% over the past week. As most would know, long-term fundamentals have a strong correlation with market price movements, 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. Specifically, we decided to study Ooredoo Q.P.S.C'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.

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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 Ooredoo Q.P.S.C is:

13% = ر.ق4.1b ÷ ر.ق31b (Based on the trailing twelve months to March 2025).

The 'return' is the yearly profit. So, this means that for every QAR1 of its shareholder's investments, the company generates a profit of QAR0.13.

View our latest analysis for Ooredoo Q.P.S.C

Why Is ROE Important For 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.

Ooredoo Q.P.S.C's Earnings Growth And 13% ROE

As you can see, Ooredoo Q.P.S.C's ROE looks pretty weak. Still, the company's ROE is higher than the average industry ROE of 9.5% so that's certainly interesting. Particularly, the substantial 28% net income growth seen by Ooredoo Q.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. Hence, there might be some other aspects that are causing earnings to grow. For instance, the company has a low payout ratio or is being managed efficiently

We then compared Ooredoo Q.P.S.C'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 9.7% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is Ooredoo Q.P.S.C fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Ooredoo Q.P.S.C Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 57% (implying that it keeps only 43% of profits) for Ooredoo Q.P.S.C suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Additionally, Ooredoo Q.P.S.C 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. 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 58%. As a result, Ooredoo Q.P.S.C's ROE is not expected to change by much either, which we inferred from the analyst estimate of 12% for future ROE.

Conclusion

On the whole, we do feel that Ooredoo Q.P.S.C has some positive attributes. Specifically, its respectable ROE which likely led to the considerable growth in earnings. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.