Has Dar Al Arkan Real Estate Development Company's (TADAWUL:4300) Impressive Stock Performance Got Anything to Do With Its Fundamentals?

Dar Al Arkan Real Estate Development (TADAWUL:4300) has had a great run on the share market with its stock up by a significant 12% over the last month. As most would know, fundamentals are what usually guide market price movements over the long-term, 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. Particularly, we will be paying attention to Dar Al Arkan Real Estate Development's ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. 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?

The formula for ROE is:

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

So, based on the above formula, the ROE for Dar Al Arkan Real Estate Development is:

4.3% = ر.س917m ÷ ر.س22b (Based on the trailing twelve months to June 2025).

The 'return' refers to a company's earnings over the last year. So, this means that for every SAR1 of its shareholder's investments, the company generates a profit of SAR0.04.

See our latest analysis for Dar Al Arkan Real Estate Development

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. 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.

Dar Al Arkan Real Estate Development's Earnings Growth And 4.3% ROE

It is quite clear that Dar Al Arkan Real Estate Development's ROE is rather low. Not just that, even compared to the industry average of 11%, the company's ROE is entirely unremarkable. Despite this, surprisingly, Dar Al Arkan Real Estate Development saw an exceptional 42% net income growth over the past five years. Therefore, there could be other reasons behind this growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that Dar Al Arkan Real Estate Development's growth is quite high when compared to the industry average growth of 26% in the same period, which is great to see.

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. Doing so will help them establish if the stock's future looks promising or ominous. If you're wondering about Dar Al Arkan Real Estate Development's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Dar Al Arkan Real Estate Development Efficiently Re-investing Its Profits?

Dar Al Arkan Real Estate Development doesn't pay any regular dividends to its shareholders, meaning that the company has been reinvesting all of its profits into the business. This is likely what's driving the high earnings growth number discussed above.

Summary

In total, it does look like Dar Al Arkan Real Estate Development has some positive aspects to its business. Even in spite of the low rate of return, the company has posted impressive earnings growth as a result of reinvesting heavily into its business. 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 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.