Shareholders Of Qatar National Bank (Q.P.S.C.) (DSM:QNBK) Must Be Happy With Their 75% Return

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Qatar National Bank (Q.P.S.C.) (DSM:QNBK) share price is up 51% in the last 5 years, clearly besting the market return of around 8.4% (ignoring dividends).

See our latest analysis for Qatar National Bank (Q.P.S.C.)

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 National Bank (Q.P.S.C.) achieved compound earnings per share (EPS) growth of 0.8% per year. This EPS growth is lower than the 9% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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. 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. We note that for Qatar National Bank (Q.P.S.C.) the TSR over the last 5 years was 75%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Qatar National Bank (Q.P.S.C.) shareholders are down 3.1% for the year (even including dividends), but the market itself is up 9.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Qatar National Bank (Q.P.S.C.) is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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