Reflecting on Sharjah Insurance Company P.S.C's (ADX:SICO) Share Price Returns Over The Last Three Years

Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Sharjah Insurance Company P.S.C. (ADX:SICO) shareholders, since the share price is down 40% in the last three years, falling well short of the market return of around 22%. And more recent buyers are having a tough time too, with a drop of 26% in the last year.

See our latest analysis for Sharjah Insurance Company P.S.C

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the three years that the share price fell, Sharjah Insurance Company P.S.C's earnings per share (EPS) dropped by 46% each year. This fall in the EPS is worse than the 15% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 49.38, it's fair to say the market sees a brighter future for the business.

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

This free interactive report on Sharjah Insurance Company P.S.C's earnings, revenue and cash flow 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Sharjah Insurance Company P.S.C, it has a TSR of -35% 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

Over the last year, Sharjah Insurance Company P.S.C shareholders took a loss of 24%, including dividends. In contrast the market gained about 27%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 11% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Sharjah Insurance Company P.S.C you should know about.

Of course Sharjah Insurance Company P.S.C 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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