Do Fundamentals Have Any Role To Play In Driving Saudi Arabian Mining Company (Ma'aden)'s (TADAWUL:1211) Stock Up Recently?

Saudi Arabian Mining Company (Ma'aden)'s (TADAWUL:1211) stock up by 4.8% over the past three months. 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 Saudi Arabian Mining Company (Ma'aden)'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 simpler terms, it measures the profitability of a company in relation to shareholder's equity.

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How To Calculate Return On Equity?

ROE 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 Saudi Arabian Mining Company (Ma'aden) is:

7.5% = ر.س4.6b ÷ ر.س61b (Based on the trailing twelve months to March 2025).

The 'return' is the yearly profit. One way to conceptualize this is that for each SAR1 of shareholders' capital it has, the company made SAR0.08 in profit.

See our latest analysis for Saudi Arabian Mining Company (Ma'aden)

What Is The Relationship Between ROE And Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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 Saudi Arabian Mining Company (Ma'aden)'s Earnings Growth And 7.5% ROE

It is hard to argue that Saudi Arabian Mining Company (Ma'aden)'s ROE is much good in and of itself. Even when compared to the industry average of 11%, the ROE figure is pretty disappointing. Although, we can see that Saudi Arabian Mining Company (Ma'aden) saw a modest net income growth of 18% over the past five years. Therefore, the growth in earnings could probably have been caused by other variables. Such as - high earnings retention or an efficient management in place.

As a next step, we compared Saudi Arabian Mining Company (Ma'aden)'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 5.2%.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. 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 Saudi Arabian Mining Company (Ma'aden)'s's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Saudi Arabian Mining Company (Ma'aden) Making Efficient Use Of Its Profits?

Given that Saudi Arabian Mining Company (Ma'aden) doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business.

Summary

In total, it does look like Saudi Arabian Mining Company (Ma'aden) has some positive aspects to its business. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. That being so, the latest analyst forecasts show that the company will continue to see an expansion in its earnings. 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.