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Is Singapore Telecommunications Limited's (SGX:Z74) Latest Stock Performance Being Led By Its Strong Fundamentals?

Simply Wall St · 4d ago

Singapore Telecommunications' (SGX:Z74) stock up by 7.9% over the past three months. Since the market usually pay for a company’s long-term financial health, we decided to study the company’s fundamentals to see if they could be influencing the market. In this article, we decided to focus on Singapore Telecommunications' 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 other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.

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How To Calculate Return On Equity?

The formula for return on equity is:

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

So, based on the above formula, the ROE for Singapore Telecommunications is:

23% = S$6.2b ÷ S$27b (Based on the trailing twelve months to September 2025).

The 'return' refers to a company's earnings over the last year. Another way to think of that is that for every SGD1 worth of equity, the company was able to earn SGD0.23 in profit.

Check out our latest analysis for Singapore Telecommunications

Why Is ROE Important For Earnings Growth?

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.

Singapore Telecommunications' Earnings Growth And 23% ROE

First thing first, we like that Singapore Telecommunications has an impressive ROE. Second, a comparison with the average ROE reported by the industry of 12% also doesn't go unnoticed by us. As a result, Singapore Telecommunications' exceptional 25% net income growth seen over the past five years, doesn't come as a surprise.

Next, on comparing with the industry net income growth, we found that Singapore Telecommunications' growth is quite high when compared to the industry average growth of 7.7% in the same period, which is great to see.

past-earnings-growth
SGX:Z74 Past Earnings Growth January 5th 2026

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Has the market priced in the future outlook for Z74? You can find out in our latest intrinsic value infographic research report.

Is Singapore Telecommunications Efficiently Re-investing Its Profits?

The high three-year median payout ratio of 70% (implying that it keeps only 30% of profits) for Singapore Telecommunications suggests that the company's growth wasn't really hampered despite it returning most of the earnings to its shareholders.

Besides, Singapore Telecommunications has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Upon studying the latest analysts' consensus data, we found that the company's future payout ratio is expected to rise to 91% over the next three years. Consequently, the higher expected payout ratio explains the decline in the company's expected ROE (to 13%) over the same period.

Conclusion

Overall, we are quite pleased with Singapore Telecommunications' 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. That being so, according to the latest industry analyst forecasts, the company's earnings are expected to shrink in the future. Are these analysts expectations based on the broad expectations for the industry, or on the company's fundamentals? Click here to be taken to our analyst's forecasts page for the company.