Those who invested in Banque Saudi Fransi (TADAWUL:1050) three years ago are up 24%

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Banque Saudi Fransi (TADAWUL:1050), which is up 11%, over three years, soundly beating the market return of 6.6% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 3.2% in the last year , including dividends .

So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.

View our latest analysis for Banque Saudi Fransi

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Banque Saudi Fransi was able to grow its EPS at 39% per year over three years, sending the share price higher. The average annual share price increase of 4% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.47.

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 Banque Saudi Fransi has grown profits over the years, but the future is more important for shareholders. This free interactive report on Banque Saudi Fransi's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Banque Saudi Fransi's TSR for the last 3 years was 24%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Banque Saudi Fransi provided a TSR of 3.2% over the last twelve months. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This suggests the company might be improving over time. 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 - Banque Saudi Fransi has 1 warning sign we think you should be aware of.

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.