Abu Dhabi National Insurance Company PJSC (ADX:ADNIC) sheds 6.6% this week, as yearly returns fall more in line with earnings growth

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Abu Dhabi National Insurance Company PJSC (ADX:ADNIC) stock is up an impressive 104% over the last five years. On the other hand, the stock price has retraced 6.6% in the last week.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Abu Dhabi National Insurance Company PJSC achieved compound earnings per share (EPS) growth of 4.0% per year. This EPS growth is slower than the share price growth of 15% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

It might be well worthwhile taking a look at our free report on Abu Dhabi National Insurance Company PJSC's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Abu Dhabi National Insurance Company PJSC the TSR over the last 5 years was 185%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Abu Dhabi National Insurance Company PJSC's TSR for the year was broadly in line with the market average, at 19%. It has to be noted that the recent return falls short of the 23% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Abu Dhabi National Insurance Company PJSC a stock worth watching. 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 Abu Dhabi National Insurance Company PJSC (including 1 which is potentially serious) .

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Emirian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.