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

Vodafone Qatar P.Q.S.C's (DSM:VFQS) stock is up by 3.2% 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. In this article, we decided to focus on Vodafone Qatar P.Q.S.C's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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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 Vodafone Qatar P.Q.S.C is:

13% = ر.ق658m ÷ ر.ق5.0b (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every QAR1 of its shareholder's investments, the company generates a profit of QAR0.13.

See our latest analysis for Vodafone Qatar P.Q.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. 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 Vodafone Qatar P.Q.S.C's Earnings Growth And 13% ROE

As you can see, Vodafone Qatar P.Q.S.C's ROE looks pretty weak. An industry comparison shows that the company's ROE is not much different from the industry average of 13% either. However, the exceptional 22% net income growth seen by Vodafone Qatar P.Q.S.C over the past five years is pretty remarkable. Considering the low ROE, it is quite possible that there might also be some other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

As a next step, we compared Vodafone Qatar P.Q.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 5.3%.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is VFQS fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is Vodafone Qatar P.Q.S.C Using Its Retained Earnings Effectively?

Vodafone Qatar P.Q.S.C's significant three-year median payout ratio of 80% (where it is retaining only 20% of its income) suggests that the company has been able to achieve a high growth in earnings despite returning most of its income to shareholders.

Moreover, Vodafone Qatar P.Q.S.C is determined to keep sharing its profits with shareholders which we infer from its long history of paying a dividend for at least ten years. 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 88%. Accordingly, forecasts suggest that Vodafone Qatar P.Q.S.C's future ROE will be 13% which is again, similar to the current ROE.

Summary

On the whole, we do feel that Vodafone Qatar P.Q.S.C has some positive attributes. 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. 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 latest analysts predictions for the company, check out this visualization of analyst forecasts 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.