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Most readers already know that shares of Abu Dhabi Ports Company PJSC (ADX:ADPORTS) have risen 5.8% over the past three months. Given that stock prices typically align with a company’s long-term financial performance, we decided to investigate whether the company’s sound financial health played a role in recent stock price movements.In particular, we will focus on Abu Dhabi Ports Company PJSC return on equity today.
ROE, or Return on Equity, is a useful tool for evaluating a company’s ability to effectively generate a return on investment from its shareholders. Simply put, ROE shows the profit generated per dollar invested by its shareholders.
Check out our latest analysis for Abu Dhabi Ports Company PJSC
How do you calculate return on equity?
this ROE formula yes:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
Therefore, according to the above formula, the ROE of Abu Dhabi Ports Company PJSC is:
6.5% = د.إ1.3b ÷ د.إ20b (based on the last twelve months to December 2022).
“Return” refers to a company’s earnings over the past year. Therefore, this means that for every AED1 invested by its shareholders, the company generates a profit of AED0.07.
What is the relationship between ROE and earnings growth?
We have established that ROE is an effective profit-generating metric for measuring a company’s future earnings. We now need to assess how much profit the company reinvests or “retains” for future growth, which then gives us an idea of the company’s growth potential. All else being equal, firms with higher returns on equity and higher profit retention typically have higher growth rates than firms that do not share the same characteristics.
Abu Dhabi Ports PJSC’s earnings growth and return on equity of 6.5%
As you can see, the ROE of Abu Dhabi Ports Company PJSC looks weak. Industry comparison shows that the company’s ROE is not much different from the industry average of 7.5%. So we’re actually happy to see Abu Dhabi Ports PJSC’s net income growing at an acceptable rate of 19% over the past five years. We think there may be other factors affecting the company’s growth. For example, the company’s management may have made some good strategic decisions, or the company’s dividend payout ratio is low.
We then compared Abu Dhabi Ports Company PJSC’s net income growth to the industry and we are pleased to see that the company’s growth figures are higher than the industry’s growth rate of 3.0% over the same period.
To a large extent, the basis of a company’s value is tied to its earnings growth. It’s important for investors to understand whether the market has priced in a company’s expected earnings growth (or decline). By doing this, they will know whether the stock is waiting in clear blue water or swampy waters.If you want to know about the valuation of Abu Dhabi Ports Company PJSC, check out This measure of its price-to-earnings ratiocompared to its industry.
Is Abu Dhabi Ports Company PJSC using its retained earnings effectively?
Abu Dhabi Ports Company PJSC does not pay any dividends, which means that all its profits are reinvested in the business, which explains the company’s considerable earnings growth.
in conclusion
Overall, we do see some positive attributes for Abu Dhabi Ports Company PJSC. With a high reinvestment rate, the company’s earnings have grown considerably despite a low ROE. That being said, the company’s earnings growth is expected to slow, as analysts are currently forecasting. Are these analysts’ forecasts based on broad expectations for the industry, or are they based on the company’s fundamentals? Click here to go to our analysts’ forecasts page for the company.
Valuation is complicated, but we’re helping make it simple.
Find out if Abu Dhabi Ports Company PJSC is likely to be overvalued or undervalued by reviewing our comprehensive analysis which includes Fair value estimates, risks and caveats, dividends, insider trading and financial health.
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This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, 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 into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.
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