Did Qatar Islamic Bank (Q.P.S.C.)'s (DSM:QIBK) Share Price Deserve to Gain 69%?

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Qatar Islamic Bank (Q.P.S.C.) (DSM:QIBK) shareholders have seen the share price rise 69% over three years, well in excess of the market return (28%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 7.7% in the last year , including dividends .

View our latest analysis for Qatar Islamic Bank (Q.P.S.C.)

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

Qatar Islamic Bank (Q.P.S.C.) was able to grow its EPS at 9.1% per year over three years, sending the share price higher. This EPS growth is lower than the 19% 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. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Qatar Islamic Bank (Q.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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Qatar Islamic Bank (Q.P.S.C.)'s TSR for the last 3 years was 85%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Qatar Islamic Bank (Q.P.S.C.) shareholders gained a total return of 7.7% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 13% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Qatar Islamic Bank (Q.P.S.C.) is showing 1 warning sign in our investment analysis , you should know about...

But note: Qatar Islamic Bank (Q.P.S.C.) 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 QA 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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