Deyaar Development PJSC (DFM:DEYAAR) sheds 4.2% this week, as yearly returns fall more in line with earnings growth

When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Deyaar Development PJSC (DFM:DEYAAR) stock is up an impressive 165% over the last five years. The last week saw the share price soften some 4.2%.

While the stock has fallen 4.2% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

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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. 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 five years of share price growth, Deyaar Development PJSC achieved compound earnings per share (EPS) growth of 65% per year. This EPS growth is higher than the 21% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 8.13 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Deyaar Development PJSC has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Deyaar Development PJSC the TSR over the last 5 years was 195%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Deyaar Development PJSC shareholders have received a total shareholder return of 53% over one year. Of course, that includes the dividend. That's better than the annualised return of 24% 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. Before forming an opinion on Deyaar Development PJSC you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

But note: Deyaar Development PJSC may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.