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Declining Stock and Solid Fundamentals: Is The Market Wrong About OUTsurance Group Limited (JSE:OUT)?

Simply Wall St · 6d ago

OUTsurance Group (JSE:OUT) has had a rough month with its share price down 1.6%. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to OUTsurance Group's ROE today.

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. Put another way, it reveals the company's success at turning shareholder investments into profits.

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How Is ROE Calculated?

The formula for ROE is:

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

So, based on the above formula, the ROE for OUTsurance Group is:

33% = R5.2b ÷ R16b (Based on the trailing twelve months to June 2025).

The 'return' is the yearly profit. Another way to think of that is that for every ZAR1 worth of equity, the company was able to earn ZAR0.33 in profit.

See our latest analysis for OUTsurance Group

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

A Side By Side comparison of OUTsurance Group's Earnings Growth And 33% ROE

Firstly, we acknowledge that OUTsurance Group has a significantly high ROE. Additionally, the company's ROE is higher compared to the industry average of 19% which is quite remarkable. So, the substantial 31% net income growth seen by OUTsurance Group over the past five years isn't overly surprising.

As a next step, we compared OUTsurance Group's net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 33% in the same period.

past-earnings-growth
JSE:OUT Past Earnings Growth January 1st 2026

Earnings growth is a huge factor in stock valuation. 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. Is OUTsurance Group fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is OUTsurance Group Efficiently Re-investing Its Profits?

OUTsurance Group has a significant three-year median payout ratio of 69%, meaning the company only retains 31% of its income. This implies that the company has been able to achieve high earnings growth despite returning most of its profits to shareholders.

Besides, OUTsurance Group has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the future payout ratio of the company over the next three years is expected to be approximately 75%. Therefore, the company's future ROE is also not expected to change by much with analysts predicting an ROE of 38%.

Summary

In total, we are pretty happy with OUTsurance Group's performance. Especially the high ROE, Which has contributed to the impressive growth seen in earnings. Despite the company reinvesting only a small portion of its profits, it still has managed to grow its earnings so that is appreciable. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.