Ooredoo Q.P.S.C.'s (DSM:ORDS) Has Had A Decent Run On The Stock market: Are Fundamentals In The Driver's Seat?

Ooredoo Q.P.S.C's (DSM:ORDS) stock up by 4.5% over the past week. We wonder if and what role the company's financials play in that price change as a company's long-term fundamentals usually dictate market outcomes. Specifically, we decided to study Ooredoo Q.P.S.C's ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Do You 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 Ooredoo Q.P.S.C is:

13% = ر.ق4.3b ÷ ر.ق34b (Based on the trailing twelve months to September 2025).

The 'return' is the income the business earned over the last year. That means that for every QAR1 worth of shareholders' equity, the company generated QAR0.13 in profit.

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

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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.

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. A comparison with the industry shows that the company's ROE is pretty similar to the average industry ROE of 11%. Moreover, we are quite pleased to see that Ooredoo Q.P.S.C's net income grew significantly at a rate of 31% over the last five years. We reckon that there could also be other factors at play thats influencing the company's growth. 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 Ooredoo Q.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 7.1%.

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). This then helps them determine if the stock is placed for a bright or bleak future. 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 Ooredoo Q.P.S.C is trading on a high P/E or a low P/E, relative to its industry.

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

The high three-year median payout ratio of 58% (implying that it keeps only 42% 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. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 59% of its profits over the next three years. Accordingly, forecasts suggest that Ooredoo Q.P.S.C's future ROE will be 12% which is again, similar to the current ROE.

Summary

In total, it does look like Ooredoo Q.P.S.C has some positive aspects to its business. Namely, its high earnings growth. We do however feel that the earnings growth number could have been even higher, had the company been reinvesting more of its earnings and paid out less dividends. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. 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.