Is ADF Group Inc.’s (TSE:DRX) Stock’s Recent Performance Being Led By Its Attractive Financial Prospects?

ADF Group (TSE:DRX) has had a great run on the share market with its stock up by a significant 31% over the last three months. Given that the market rewards strong financials in the long-term, we wonder if that is the case in this instance. Particularly, we will be paying attention to ADF 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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ROE can be calculated by using the formula:

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

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

16% = CA$29m ÷ CA$181m (Based on the trailing twelve months to October 2025).

The ‘return’ is the amount earned after tax over the last twelve months. One way to conceptualize this is that for each CA$1 of shareholders’ capital it has, the company made CA$0.16 in profit.

View our latest analysis for ADF Group

Thus far, we have learned that ROE measures how efficiently a company is generating its profits. 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. 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.

At first glance, ADF Group seems to have a decent ROE. Even when compared to the industry average of 14% the company’s ROE looks quite decent. Consequently, this likely laid the ground for the impressive net income growth of 38% seen over the past five years by ADF Group. We reckon that there could also be other factors at play here. Such as – high earnings retention or an efficient management in place.

Next, on comparing with the industry net income growth, we found that ADF Group’s growth is quite high when compared to the industry average growth of 16% in the same period, which is great to see.

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock’s future looks promising or ominous. Has the market priced in the future outlook for DRX? You can find out in our latest intrinsic value infographic research report

ADF Group’s ‘ three-year median payout ratio is on the lower side at 2.4% implying that it is retaining a higher percentage (98%) of its profits. This suggests that the management is reinvesting most of the profits to grow the business as evidenced by the growth seen by the company.

Besides, ADF 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.

On the whole, we feel that ADF Group’s performance has been quite good. In particular, it’s great to see that the company is investing heavily into its business and along with a high rate of return, that has resulted in a sizeable growth in its earnings. That being so, the latest analyst forecasts show that the company will continue to see an expansion in its earnings. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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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 account of your objectives, or your 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.