Saudi Investment Bank (TADAWUL:1030) shareholders have earned a 11% CAGR over the last five years

By
Simply Wall St
Published
November 15, 2021
SASE:1030
Source: Shutterstock

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But The Saudi Investment Bank (TADAWUL:1030) has fallen short of that second goal, with a share price rise of 53% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 13%.

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

Check out our latest analysis for Saudi Investment Bank

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Saudi Investment Bank actually saw its EPS drop 1.1% per year.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

The revenue growth of 0.9% per year hardly seems impressive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
SASE:1030 Earnings and Revenue Growth November 16th 2021

We know that Saudi Investment Bank has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Saudi Investment Bank stock, you should check out this free report showing analyst profit forecasts.

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. As it happens, Saudi Investment Bank's TSR for the last 5 years was 72%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Saudi Investment Bank provided a TSR of 19% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 11% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Case in point: We've spotted 2 warning signs for Saudi Investment Bank you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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