The cooperative insurance company (TADAWUL: 8010) has seen strong momentum: does that require a deeper study of its financial prospects?

Most readers already know that Company for Cooperative Insurance (TADAWUL: 8010) stock is up 10% in the past three months. Because stock prices tend to be aligned with a company’s financial performance over the long term, we decided to take a closer look at its financial indicators to see if they played a role in recent price action. Today we will pay particular attention to the ROE of the Society for Cooperative Insurance.

Return on Equity, or ROE, is an important factor to consider as a shareholder telling them how effectively their capital will be reinvested. In short, ROE shows the profit each dollar generates on its equity investment.

Check out our latest analysis for Cooperative Insurance Companies

How do you calculate the return on equity?

the Formula for ROE is:

Return on Equity = Net Income (from continuing operations) ÷ Equity

Based on the formula above, the corporate ROE for cooperative insurance is:

11% = ر, س 341 million ÷ ر, س 3.0 b (based on the last twelve months up to June 2021).

The “return” is the annual profit. This means that for every SAR1 of its shareholder’s investments, the company will make a profit of SAR0.11.

Why is ROE important to earnings growth?

So far we have learned that ROE is a measure of a company’s profitability. Depending on how much of these profits the company reinvests or “withholds” and how effectively this is done, we can then estimate the earnings growth potential of a company. Assuming all else is equal, companies that have both higher return on equity and higher earnings retention typically have a higher growth rate than companies that do not share the same characteristics.

Profit Growth Company and 11% ROE in Cooperative Insurance

At first glance, the company’s ROE doesn’t look very promising. However, it does not go unnoticed to us that the ROE is well above the industry average of 3.5%. But given Company for Cooperative Insurance’s five-year net income decline of 11% over the past five years, we might reconsider. Remember, the company has a slightly low ROE. It’s just that the industry’s ROE is lower. So this explains the falling revenue.

Next, when compared to the industry, which has shrunk its profits by 4.9% over the same period, we still found that Company for Cooperative Insurance’s performance is pretty grim as the company is shrinking profits faster than the industry .

SASE: 8010 Past earnings growth September 10, 2021

The basis for increasing the value of a company is largely linked to its earnings development. The investor should try to figure out whether it is pricing in expected growth or decline in earnings, whatever the case. This helps him determine whether the future of the stock looks promising or ominous. If you’re wondering about Company for Cooperative Insurance’s rating, look at this price-earnings ratio versus its industry.

Does the cooperative insurance company use its profits efficiently?

Despite a normal 3-year median payout ratio of 26% (with 74% of profits retained), the cooperative insurance company saw profits decline, as we saw above. So there could be other explanations in this regard. For example, the company’s business may deteriorate.

Additionally, the cooperative insurance company has been paying dividends for at least a decade, suggesting that maintaining dividend payments is far more important to management, even if it comes at the expense of business growth. Studying the latest analyst consensus data, we found that the company’s future payout ratio is projected to climb to 40% over the next three years. However, it is projected that Company for Cooperative Insurance’s future ROE will rise to 16%, although the company’s payout ratio is expected to increase. We suspect there might be a few other features of the business that could drive the anticipated growth in the company’s ROE.

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Overall, we are of the opinion that the Gesellschaft für Genossenschaftsversicherung has a number of positive factors to consider. The low earnings growth is somewhat worrying, however, especially since the company has a respectable return on investment and is reinvesting a large portion of its earnings. As it stands, there could be a few other factors that are not necessarily in control of the business and are preventing its growth. However, given the latest analyst estimates, we’ve determined that the company’s earnings growth rate is expected to see a huge improvement. To learn more about the company’s future earnings growth projections, take a look at this for free Report on analyst forecast for the company to learn more.

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This article from Simply Wall St is of a general nature. We only provide comments based on historical data and analyst projections using an unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamentals. Note that our analysis may not take into account the latest company announcements or quality material, which may be sensitive to the price. Simply Wall St has no position in the stocks mentioned.
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