Oman Insurance Company P.S.C (DFM:OIC) jumps 15% this week, though earnings growth is still tracking behind three-year shareholder returns

By
Simply Wall St
Published
February 21, 2022
DFM:OIC
Source: Shutterstock

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But if you buy shares in a really great company, you can more than double your money. For example, the Oman Insurance Company P.S.C. (DFM:OIC) share price has soared 104% in the last three years. How nice for those who held the stock! In the last week the share price is up 15%.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

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

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During three years of share price growth, Oman Insurance Company P.S.C achieved compound earnings per share growth of 21% per year. This EPS growth is lower than the 27% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

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:OIC Earnings Per Share Growth February 21st 2022

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

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 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. We note that for Oman Insurance Company P.S.C the TSR over the last 3 years was 125%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Oman Insurance Company P.S.C shareholders gained a total return of 53% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 17% over half a decade It is possible that returns will improve along with the business fundamentals. 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. Case in point: We've spotted 1 warning sign for Oman Insurance Company P.S.C you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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