The past three-year earnings decline for Gulf Medical Projects Company (PJSC) (ADX:GMPC) likely explains shareholders long-term losses

Gulf Medical Projects Company (PJSC) (ADX:GMPC) shareholders should be happy to see the share price up 14% in the last week. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 20% in the last three years, falling well short of the market return.

On a more encouraging note the company has added د.إ175m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

Check out our latest analysis for Gulf Medical Projects Company (PJSC)

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the three years that the share price fell, Gulf Medical Projects Company (PJSC)'s earnings per share (EPS) dropped by 20% each year. In comparison the 7% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. In the case of Gulf Medical Projects Company (PJSC), it has a TSR of -7.8% for the last 3 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

Investors in Gulf Medical Projects Company (PJSC) had a tough year, with a total loss of 11% (including dividends), against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 9% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should learn about the 3 warning signs we've spotted with Gulf Medical Projects Company (PJSC) (including 2 which can't be ignored) .

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.