Emaar Development PJSC's (DFM:EMAARDEV) 46% CAGR outpaced the company's earnings growth over the same five-year period

Long term investing can be life changing when you buy and hold the truly great businesses. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Emaar Development PJSC (DFM:EMAARDEV) share price has soared 428% over five years. This just goes to show the value creation that some businesses can achieve. In the last week the share price is up 3.5%.

Since the stock has added د.إ2.0b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Over half a decade, Emaar Development PJSC managed to grow its earnings per share at 38% a year. That makes the EPS growth particularly close to the yearly share price growth of 40%. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Emaar Development PJSC has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Emaar Development PJSC the TSR over the last 5 years was 553%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Emaar Development PJSC shareholders have received a total shareholder return of 42% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 46% per year, is even more impressive. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Emaar Development PJSC you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Emirian exchanges.

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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.