Most readers would already be aware that Ras Al Khaimah for White Cement & Construction Materials P.S.C's (ADX:RAKWCT) stock increased significantly by 11% over the past week. However, in this article, we decided to focus on its weak fundamentals, as long-term financial performance of a business is what ultimatley dictates market outcomes. In this article, we decided to focus on Ras Al Khaimah for White Cement & Construction Materials P.S.C's ROE.
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.
Check out our latest analysis for Ras Al Khaimah for White Cement & Construction Materials P.S.C
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 Ras Al Khaimah for White Cement & Construction Materials P.S.C is:
4.5% = د.إ36m ÷ د.إ796m (Based on the trailing twelve months to June 2022).
The 'return' is the yearly profit. That means that for every AED1 worth of shareholders' equity, the company generated AED0.04 in profit.
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. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.
As you can see, Ras Al Khaimah for White Cement & Construction Materials P.S.C's ROE looks pretty weak. Not just that, even compared to the industry average of 7.6%, the company's ROE is entirely unremarkable. Hence, the flat earnings seen by Ras Al Khaimah for White Cement & Construction Materials P.S.C over the past five years could probably be the result of it having a lower ROE.
We then compared Ras Al Khaimah for White Cement & Construction Materials P.S.C's net income growth with the industry and found that the company's growth figure is a bit less than the average industry growth rate of 1.5% in the same period.
Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. What is RAKWCT worth today? The intrinsic value infographic in our free research report helps visualize whether RAKWCT is currently mispriced by the market.
Ras Al Khaimah for White Cement & Construction Materials P.S.C has a very high three-year median payout ratio of 140% over the last last three years, which suggests that the company is dipping into more than just its earnings to pay its dividend. This does go some way in explaining the negligible earnings growth seen by Ras Al Khaimah for White Cement & Construction Materials P.S.C. Paying a dividend beyond their means is usually not viable over the long term. That's a huge risk in our books. You can see the 4 risks we have identified for Ras Al Khaimah for White Cement & Construction Materials P.S.C by visiting our risks dashboard for free on our platform here.
In addition, Ras Al Khaimah for White Cement & Construction Materials P.S.C has been paying dividends over a period of at least ten years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth.
On the whole, Ras Al Khaimah for White Cement & Construction Materials P.S.C's performance is quite a big let-down. Specifically, it has shown quite an unsatisfactory performance as far as earnings growth is concerned, and a poor ROE and an equally poor rate of reinvestment seem to be the reason behind this inadequate performance. So far, we've only made a quick discussion around the company's earnings growth. So it may be worth checking this free detailed graph of Ras Al Khaimah for White Cement & Construction Materials P.S.C's past earnings, as well as revenue and cash flows to get a deeper insight into the company's performance.
Find out whether Ras Al Khaimah for White Cement & Construction Materials P.S.C is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis. Find out more about our editorial guidelines and team.
Ras Al Khaimah Co. for White Cement & Construction Materials P.S.C., together with its subsidiaries, manufactures and supplies white cement, lime products, and cement products in the United Arab Emirates, Gulf Cooperation Council countries, India, Jordan, Yemen, and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with acceptable track record.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis. Find out more about our editorial guidelines and team.
Ras Al Khaimah Co. for White Cement & Construction Materials P.S.C., together with its subsidiaries, manufactures and supplies white cement, lime products, and cement products in the United Arab Emirates, Gulf Cooperation Council countries, India, Jordan, Yemen, and internationally.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with acceptable track record.
Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.