Is Mobile Telecommunications Company Saudi Arabia's (TADAWUL:7030) Recent Stock Performance Influenced By Its Financials In Any Way?

Mobile Telecommunications Company Saudi Arabia's (TADAWUL:7030) stock up by 4.7% over the past three months. Given that stock prices are usually aligned with a company's financial performance in the long-term, we decided to investigate if the company's decent financials had a hand to play in the recent price move. Particularly, we will be paying attention to Mobile Telecommunications Company Saudi Arabia's ROE today.

Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

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How Is ROE Calculated?

Return on equity 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 Mobile Telecommunications Company Saudi Arabia is:

6.1% = ر.س647m ÷ ر.س11b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each SAR1 of shareholders' capital it has, the company made SAR0.06 in profit.

See our latest analysis for Mobile Telecommunications Company Saudi Arabia

What Is The Relationship Between ROE And 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 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.

Mobile Telecommunications Company Saudi Arabia's Earnings Growth And 6.1% ROE

As you can see, Mobile Telecommunications Company Saudi Arabia's ROE looks pretty weak. Even compared to the average industry ROE of 13%, the company's ROE is quite dismal. Although, we can see that Mobile Telecommunications Company Saudi Arabia saw a modest net income growth of 17% over the past five years. We believe that there might be other aspects that are positively influencing the company's earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Mobile Telecommunications Company Saudi Arabia's net income growth with the industry and we're pleased to see that the company's growth figure is higher when compared with the industry which has a growth rate of 4.6% in the same 5-year period.

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. This then helps them determine if the stock is placed for a bright or bleak future. If you're wondering about Mobile Telecommunications Company Saudi Arabia's's valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Mobile Telecommunications Company Saudi Arabia Efficiently Re-investing Its Profits?

While Mobile Telecommunications Company Saudi Arabia has a three-year median payout ratio of 71% (which means it retains 29% 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.

While Mobile Telecommunications Company Saudi Arabia has been growing its earnings, it only recently started to pay dividends which likely means that the company decided to impress new and existing shareholders with a dividend. Based on the latest analysts' estimates, we found that the company's future payout ratio over the next three years is expected to hold steady at 66%. However, Mobile Telecommunications Company Saudi Arabia's ROE is predicted to rise to 7.4% despite there being no anticipated change in its payout ratio.

Summary

In total, it does look like Mobile Telecommunications Company Saudi Arabia has some positive aspects to its business. 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. That being so, a study of the latest analyst forecasts show that the company is expected to see a slowdown in its future earnings growth. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

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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.