Abdullah Saad Mohammed Abo Moati for Bookstores Company's (TADAWUL:4191) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?

With its stock down 21% over the past month, it is easy to disregard Abdullah Saad Mohammed Abo Moati for Bookstores (TADAWUL:4191). However, stock prices are usually driven by a company’s financials over the long term, which in this case look pretty respectable. Specifically, we decided to study Abdullah Saad Mohammed Abo Moati for Bookstores' ROE in this article.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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 Abdullah Saad Mohammed Abo Moati for Bookstores is:

11% = ر.س26m ÷ ر.س247m (Based on the trailing twelve months to September 2025).

The 'return' is the amount earned after tax over the last twelve months. Another way to think of that is that for every SAR1 worth of equity, the company was able to earn SAR0.11 in profit.

See our latest analysis for Abdullah Saad Mohammed Abo Moati for Bookstores

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. 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 everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Abdullah Saad Mohammed Abo Moati for Bookstores' Earnings Growth And 11% ROE

As you can see, Abdullah Saad Mohammed Abo Moati for Bookstores' ROE looks pretty weak. Further, we noted that the company's ROE is similar to the industry average of 11%. Moreover, we are quite pleased to see that Abdullah Saad Mohammed Abo Moati for Bookstores' net income grew significantly at a rate of 20% over the last five years. We reckon that there could also be other factors at play thats influencing the company's growth. Such as - high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that the growth figure reported by Abdullah Saad Mohammed Abo Moati for Bookstores compares quite favourably to the industry average, which shows a decline of 1.3% over the last few years.

Earnings growth is a huge factor in stock valuation. 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 Abdullah Saad Mohammed Abo Moati for Bookstores''s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Abdullah Saad Mohammed Abo Moati for Bookstores Making Efficient Use Of Its Profits?

Abdullah Saad Mohammed Abo Moati for Bookstores' significant three-year median payout ratio of 70% (where it is retaining only 30% 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.

Additionally, Abdullah Saad Mohammed Abo Moati for Bookstores has paid dividends over a period of five years which means that the company is pretty serious about sharing its profits with shareholders.

Conclusion

On the whole, we do feel that Abdullah Saad Mohammed Abo Moati for Bookstores has some positive attributes. While no doubt its earnings growth is pretty substantial, we do feel that the reinvestment rate is pretty low, meaning, the earnings growth number could have been significantly higher had the company been retaining more 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 Abdullah Saad Mohammed Abo Moati for Bookstores and see how it has performed in the past by looking at this FREE detailed graph of past earnings, revenue and cash flows.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.