The one-year decline in earnings for Ataa Educational TADAWUL:4292) isn't encouraging, but shareholders are still up 73% over that period

By
Simply Wall St
Published
August 27, 2021
SASE:4292
Source: Shutterstock

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Ataa Educational Company (TADAWUL:4292) share price is up 68% in the last 1 year, clearly besting the market return of around 9.1% (not including dividends). That's a solid performance by our standards! Ataa Educational hasn't been listed for long, so it's still not clear if it is a long term winner.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Ataa Educational

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last year, Ataa Educational actually saw its earnings per share drop 43%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We are skeptical of the suggestion that the 1.5% dividend yield would entice buyers to the stock. Ataa Educational's revenue actually dropped 18% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
SASE:4292 Earnings and Revenue Growth August 28th 2021

Take a more thorough look at Ataa Educational's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Ataa Educational's TSR for the last 1 year was 73%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Ataa Educational boasts a total shareholder return of 73% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 35% in the last three months. This suggests the company is continuing to win over new investors. It's always interesting to track share price performance over the longer term. But to understand Ataa Educational better, we need to consider many other factors. Take risks, for example - Ataa Educational has 3 warning signs we think you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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