Qatar Islamic Bank (Q.P.S.C.)'s (DSM:QIBK) investors will be pleased with their favorable 57% return over the last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Qatar Islamic Bank (Q.P.S.C.) share price has climbed 35% in five years, easily topping the market decline of 2.7% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.6% in the last year , including dividends .

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

View our latest analysis for Qatar Islamic Bank (Q.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. 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 11% per year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Qatar Islamic Bank (Q.P.S.C.) the TSR over the last 5 years was 57%, 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

It's nice to see that Qatar Islamic Bank (Q.P.S.C.) shareholders have received a total shareholder return of 8.6% over the last year. And that does include the dividend. However, the TSR over five years, coming in at 9% per year, is even more impressive. Before forming an opinion on Qatar Islamic Bank (Q.P.S.C.) you might want to consider these 3 valuation metrics.

We will like Qatar Islamic Bank (Q.P.S.C.) better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.