Stock Analysis

Did Dubai Investments PJSC's (DFM:DIC) Share Price Deserve to Gain 33%?

DFM:DIC
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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. To wit, the Dubai Investments PJSC (DFM:DIC) share price is 33% higher than it was a year ago, much better than the market return of around 5.8% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! On the other hand, longer term shareholders have had a tougher run, with the stock falling 31% in three years.

View our latest analysis for Dubai Investments PJSC

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Dubai Investments PJSC was able to grow EPS by 59% in the last twelve months. This EPS growth is significantly higher than the 33% increase in the share price. So it seems like the market has cooled on Dubai Investments PJSC, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.86.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
DFM:DIC Earnings Per Share Growth January 12th 2021

We know that Dubai Investments PJSC has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Dubai Investments PJSC, it has a TSR of 44% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Dubai Investments PJSC shareholders have received a total shareholder return of 44% over the last year. Of course, that includes the dividend. That's better than the annualised return of 8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Dubai Investments PJSC better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Dubai Investments PJSC (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course Dubai Investments 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 AE exchanges.

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This article by Simply Wall St is general in nature. 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.
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