Has AlMuneef Company for Trade, Industry, Agriculture and Contracting's (TADAWUL:9569) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

AlMuneef Company for Trade Industry Agriculture and Contracting (TADAWUL:9569) has had a great run on the share market with its stock up by a significant 17% over the last month. 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. In this article, we decided to focus on AlMuneef Company for Trade Industry Agriculture and Contracting's ROE.

Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors’ money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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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 AlMuneef Company for Trade Industry Agriculture and Contracting is:

20% = ر.س22m ÷ ر.س110m (Based on the trailing twelve months to June 2025).

The 'return' is the profit over the last twelve months. That means that for every SAR1 worth of shareholders' equity, the company generated SAR0.20 in profit.

See our latest analysis for AlMuneef Company for Trade Industry Agriculture and Contracting

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. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of AlMuneef Company for Trade Industry Agriculture and Contracting's Earnings Growth And 20% ROE

When you first look at it, AlMuneef Company for Trade Industry Agriculture and Contracting's ROE doesn't look that attractive. However, the fact that the company's ROE is higher than the average industry ROE of 7.4%, is definitely interesting. However, AlMuneef Company for Trade Industry Agriculture and Contracting has seen a flattish net income growth over the past five years, which is not saying much. Bear in mind, the company does have a slightly low ROE. It is just that the industry ROE is lower. Hence, this goes some way in explaining the flat earnings growth.

We then compared AlMuneef Company for Trade Industry Agriculture and Contracting's net income growth with the industry and found that the average industry growth rate was 14% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is AlMuneef Company for Trade Industry Agriculture and Contracting fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is AlMuneef Company for Trade Industry Agriculture and Contracting Efficiently Re-investing Its Profits?

Despite having a normal three-year median payout ratio of 43% (implying that the company keeps 57% of its income) over the last three years, AlMuneef Company for Trade Industry Agriculture and Contracting has seen a negligible amount of growth in earnings as we saw above. So there might be other factors at play here which could potentially be hampering growth. For example, the business has faced some headwinds.

Only recently, AlMuneef Company for Trade Industry Agriculture and Contracting started paying a dividend. This means that the management might have concluded that its shareholders prefer dividends over earnings growth.

Conclusion

Overall, we feel that AlMuneef Company for Trade Industry Agriculture and Contracting certainly does have some positive factors to consider. Although, we are disappointed to see a lack of growth in earnings even in spite of a moderate ROE and and a high reinvestment rate. We believe that there might be some outside factors that could be having a negative impact on the business. Until now, we have only just grazed the surface of the company's past performance by looking at the company's fundamentals. So it may be worth checking this free detailed graph of AlMuneef Company for Trade Industry Agriculture and Contracting'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.