Investors in Qatar International Islamic Bank (Q.P.S.C) (DSM:QIIK) have seen decent returns of 65% over the past five years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the Qatar International Islamic Bank (Q.P.S.C) share price has climbed 32% in five years, easily topping the market return of 10% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 6.0%, including dividends.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

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To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During five years of share price growth, Qatar International Islamic Bank (Q.P.S.C) achieved compound earnings per share (EPS) growth of 6.5% per year. This EPS growth is reasonably close to the 6% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

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. 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. As it happens, Qatar International Islamic Bank (Q.P.S.C)'s TSR for the last 5 years was 65%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Qatar International Islamic Bank (Q.P.S.C) provided a TSR of 6.0% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 11% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Qatar International Islamic Bank (Q.P.S.C) better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Qatar International Islamic Bank (Q.P.S.C) you should be aware of.

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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.