Earnings growth of 752% over 1 year hasn't been enough to translate into positive returns for Middle East Healthcare (TADAWUL:4009) shareholders

Investing in stocks comes with the risk that the share price will fall. Unfortunately, shareholders of Middle East Healthcare Company (TADAWUL:4009) have suffered share price declines over the last year. The share price has slid 51% in that time. On the bright side, the stock is actually up 34% in the last three years. Shareholders have had an even rougher run lately, with the share price down 36% in the last 90 days.

After losing 6.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Middle East Healthcare saw its earnings per share increase strongly. The rate of growth may not be sustainable, but it is still really positive. As a result, we're surprised to see the weak share price. Some different data might shed some more light on the situation.

With a low yield of 1.4% we doubt that the dividend influences the share price much. Middle East Healthcare managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Middle East Healthcare has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

A Different Perspective

We regret to report that Middle East Healthcare shareholders are down 50% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 0.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Middle East Healthcare better, we need to consider many other factors. For example, we've discovered 2 warning signs for Middle East Healthcare (1 is a bit unpleasant!) that you should be aware of before investing here.

But note: Middle East Healthcare may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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