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Could The Market Be Wrong About Leejam Sports Company (TADAWUL:1830) Given Its Attractive Financial Prospects?

Simply Wall St · 3d ago

It is hard to get excited after looking at Leejam Sports' (TADAWUL:1830) recent performance, when its stock has declined 22% over the past three months. However, stock prices are usually driven by a company’s financial performance over the long term, which in this case looks quite promising. In this article, we decided to focus on Leejam Sports' ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How To Calculate Return On Equity?

The formula for ROE is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Leejam Sports is:

25% = ر.س326m ÷ ر.س1.3b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. So, this means that for every SAR1 of its shareholder's investments, the company generates a profit of SAR0.25.

View our latest analysis for Leejam Sports

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. 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.

A Side By Side comparison of Leejam Sports' Earnings Growth And 25% ROE

To start with, Leejam Sports' ROE looks acceptable. Especially when compared to the industry average of 13% the company's ROE looks pretty impressive. Probably as a result of this, Leejam Sports was able to see an impressive net income growth of 35% over the last five years. However, there could also be other causes behind this growth. Such as - high earnings retention or an efficient management in place.

As a next step, we compared Leejam Sports' net income growth with the industry, and pleasingly, we found that the growth seen by the company is higher than the average industry growth of 24%.

past-earnings-growth
SASE:1830 Past Earnings Growth December 18th 2025

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). Doing so will help them establish if the stock's future looks promising or ominous. Has the market priced in the future outlook for 1830? You can find out in our latest intrinsic value infographic research report.

Is Leejam Sports Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 55% (implying that it keeps only 45% of profits) for Leejam Sports suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Additionally, Leejam Sports has paid dividends over a period of seven years which means that the company is pretty serious about sharing its profits with shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 69% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Conclusion

On the whole, we feel that Leejam Sports' performance has been quite good. In particular, its high ROE is quite noteworthy and also the probable explanation behind its considerable earnings growth. Yet, the company is retaining a small portion of its profits. Which means that the company has been able to grow its earnings in spite of it, so that's not too bad. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.