Qatar Islamic Bank (Q.P.S.C.)'s (DSM:QIBK) five-year earnings growth trails the shareholder returns

Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Qatar Islamic Bank (Q.P.S.C.) (DSM:QIBK) share price is up 10% in the last 5 years, clearly besting the market decline of around 6.9% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 11%, including dividends.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

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

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 five years of share price growth, Qatar Islamic Bank (Q.P.S.C.) achieved compound earnings per share (EPS) growth of 9.6% per year. This EPS growth is higher than the 2% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 10.79 also suggests market apprehension.

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

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

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Qatar Islamic Bank (Q.P.S.C.) the TSR over the last 5 years was 29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Qatar Islamic Bank (Q.P.S.C.) shareholders have received a total shareholder return of 11% over one year. Of course, that includes the dividend. That's better than the annualised return of 5% 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 Qatar Islamic Bank (Q.P.S.C.) you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

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