Nasdaq
華爾街日報The total return for Al Rajhi Company for Cooperative Insurance (TADAWUL:8230) investors has risen faster than earnings growth over the last five years
Some Al Rajhi Company for Cooperative Insurance (TADAWUL:8230) shareholders are probably rather concerned to see the share price fall 39% over the last three months. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 133% in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 57% decline over the last twelve months.
While the stock has fallen 5.8% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Al Rajhi Company for Cooperative Insurance achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is reasonably close to the 18% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Al Rajhi Company for Cooperative Insurance's key metrics by checking this interactive graph of Al Rajhi Company for Cooperative Insurance's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 11% in the twelve months, Al Rajhi Company for Cooperative Insurance shareholders did even worse, losing 57%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 18% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Al Rajhi Company for Cooperative Insurance , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.