Those who invested in Abu Dhabi Islamic Bank PJSC (ADX:ADIB) five years ago are up 208%

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Abu Dhabi Islamic Bank PJSC (ADX:ADIB) shareholders would be well aware of this, since the stock is up 135% in five years. It's also up 8.9% in about a month.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Abu Dhabi Islamic Bank PJSC

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Abu Dhabi Islamic Bank PJSC achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is reasonably close to the 19% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how Abu Dhabi Islamic Bank PJSC has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Abu Dhabi Islamic Bank PJSC stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Abu Dhabi Islamic Bank PJSC, it has a TSR of 208% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Abu Dhabi Islamic Bank PJSC shareholders have received a total shareholder return of 12% over one year. Of course, that includes the dividend. However, that falls short of the 25% TSR per annum it has made for shareholders, each year, over five years. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. Take risks, for example - Abu Dhabi Islamic Bank PJSC has 1 warning sign we think you should be aware of.

Of course Abu Dhabi Islamic Bank PJSC may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.