Can Mixed Fundamentals Have A Negative Impact on The National Agricultural Development Company (TADAWUL:6010) Current Share Price Momentum?
Can Mixed Fundamentals Have A Negative Impact on The National Agricultural Development Company (TADAWUL:6010) Current Share Price Momentum? Simply Wall St
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National Agricultural Development’s ROE and Its Impact on Share Price Momentum
National Agricultural Development (TADAWUL:6010) has experienced a significant 27% increase in its stock price over the past three months. However, concerns arise regarding the company’s inconsistent financial performance and its potential impact on the current share price momentum. In this report, we will focus on National Agricultural Development’s Return on Equity (ROE) and its implications.
ROE is a crucial metric used to assess a company’s efficient utilization of its capital by its management. It measures the company’s ability to generate profits from shareholder investments.
Click here to access our latest analysis for National Agricultural Development
How To Calculate Return On Equity?
Return on Equity can be calculated using the formula:
- Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
Based on this formula, National Agricultural Development’s ROE is:
- 11% = SAR156m ÷ SAR1.4b (Based on the trailing twelve months to June 2023)
The ROE of 11% indicates that for every SAR1 of shareholders’ equity, the company generated SAR0.11 in profit.
The Relationship Between ROE And Earnings Growth
ROE serves as a reliable indicator of a company’s future earnings potential. It allows us to assess the company’s growth rate based on the amount of profits it retains and reinvests. Generally, companies with high ROE and profit retention tend to have higher growth rates compared to those without these attributes.
National Agricultural Development’s Earnings Growth And 11% ROE
Although National Agricultural Development’s ROE may seem unimpressive, it is comparable to the industry average of 12%. However, the company’s net income has declined by 19% over the past five years, indicating a correlation between the low ROE and shrinking earnings. Furthermore, while National Agricultural Development’s earnings have been decreasing, the industry has experienced a 14% growth in earnings during the same period, which is concerning.
Earnings growth significantly impacts stock valuation. Investors need to determine whether the expected earnings growth is already reflected in the share price. To assess this, you can refer to our infographic on the company’s intrinsic value.
Is National Agricultural Development Making Efficient Use Of Its Profits?
Despite not paying dividends, National Agricultural Development retains all of its profits. This is perplexing considering the lack of earnings growth. It is possible that the company’s business is deteriorating.
Conclusion
The performance of National Agricultural Development can be interpreted in various ways. Despite retaining most of its profits, the low ROE suggests that investors may not benefit from reinvestment. The stagnant earnings growth supports this theory. However, industry analysts forecast a significant improvement in the company’s earnings growth rate. To learn more about these forecasts, you can access our free report on analyst forecasts for the company.
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Find out whether National Agricultural Development 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. View the Free Analysis
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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 into account your objectives or 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.
SDGs, Targets, and Indicators Analysis
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 8: Decent Work and Economic Growth
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 12: Responsible Consumption and Production
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
- SDG 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries.
- SDG 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Indicator for SDG 8.5: Employment-to-population ratio, Labor productivity, Average hourly earnings
- Indicator for SDG 9.2: Manufacturing value added as a proportion of GDP, Employment in manufacturing as a proportion of total employment
- Indicator for SDG 12.6: Adoption of sustainable practices by companies, Integration of sustainability information into reporting cycle
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 8: Decent Work and Economic Growth | SDG 8.5: By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value. | Employment-to-population ratio, Labor productivity, Average hourly earnings |
| SDG 9: Industry, Innovation, and Infrastructure | SDG 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries. | Manufacturing value added as a proportion of GDP, Employment in manufacturing as a proportion of total employment |
| SDG 12: Responsible Consumption and Production | SDG 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. | Adoption of sustainable practices by companies, Integration of sustainability information into reporting cycle |
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: simplywall.st
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