Has Alwasail Industrial Company's (TADAWUL:9525) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

Alwasail Industrial (TADAWUL:9525) has had a great run on the share market with its stock up by a significant 15% over the last three months. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to study its financial indicators more closely to see if they had a hand to play in the recent price move. Specifically, we decided to study Alwasail Industrial'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. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Alwasail Industrial is:

8.7% = ر.س32m ÷ ر.س366m (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. So, this means that for every SAR1 of its shareholder's investments, the company generates a profit of SAR0.09.

See our latest analysis for Alwasail Industrial

What Has ROE Got To Do With 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 Alwasail Industrial's Earnings Growth And 8.7% ROE

As you can see, Alwasail Industrial's ROE looks pretty weak. Further, we noted that the company's ROE is similar to the industry average of 8.7%. So we are actually pleased to see that Alwasail Industrial's net income grew at an acceptable rate of 7.7% over the last five years. We reckon that there could also be other factors at play that are 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.

Next, on comparing with the industry net income growth, we found that the growth figure reported by Alwasail Industrial compares quite favourably to the industry average, which shows a decline of 1.2% over the last few years.

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Alwasail Industrial's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Alwasail Industrial Making Efficient Use Of Its Profits?

While Alwasail Industrial has a three-year median payout ratio of 62% (which means it retains 38% of profits), the company has still seen a fair bit of earnings growth in the past, meaning that its high payout ratio hasn't hampered its ability to grow.

Additionally, Alwasail Industrial has paid dividends over a period of four years which means that the company is pretty serious about sharing its profits with shareholders.

Conclusion

On the whole, we do feel that Alwasail Industrial has some positive attributes. That is, quite an impressive growth in earnings. However, the low profit retention means that the company's earnings growth could have been higher, had it been reinvesting a higher portion of its profits. So far, we've only made a quick discussion around the company's earnings growth. You can do your own research on Alwasail Industrial and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

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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.