Is Jahez International Company for Information Systems Technology’s (TADAWUL:9526) Recent Stock Performance Influenced By Its Fundamentals In Any Way?

Jahez International Company for Information Systems Technology’s (TADAWUL:9526) stock is up by a considerable 22% over the past 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. Specifically, we decided to study Jahez International Company for Information Systems Technology’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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

Check out our latest analysis for Jahez International Company for Information Systems Technology

How Is ROE Calculated?

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 Jahez International Company for Information Systems Technology is:

5.8% = ر.س62m ÷ ر.س1.1b (Based on the trailing twelve months to June 2023).

The ‘return’ is the income the business earned over the last year. That means that for every SAR1 worth of shareholders’ equity, the company generated SAR0.06 in profit.

Why Is ROE Important For 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.

Jahez International Company for Information Systems Technology’s Earnings Growth And 5.8% ROE

As you can see, Jahez International Company for Information Systems Technology’s ROE looks pretty weak. Even when compared to the industry average of 11%, the ROE figure is pretty disappointing. However, we we’re pleasantly surprised to see that Jahez International Company for Information Systems Technology grew its net income at a significant rate of 25% in the last five years. We reckon that there could be other factors at play here. For instance, the company has a low payout ratio or is being managed efficiently.

We then compared Jahez International Company for Information Systems Technology’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 2.1% in the same 5-year period.

Earnings growth is an important metric to consider when valuing a stock. It’s important for an investor to know whether the market has priced in the company’s expected earnings growth (or decline). By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Is 9526 fairly valued? This infographic on the company’s intrinsic value has everything you need to know.

Is Jahez International Company for Information Systems Technology Using Its Retained Earnings Effectively?

Jahez International Company for Information Systems Technology doesn’t pay any dividend 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.

Conclusion

On the whole, we do feel that Jahez International Company for Information Systems Technology has some positive attributes. 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. The latest industry analyst forecasts show that the company is expected to maintain its current growth rate. 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.