Despite the downward trend in earnings at Halwani Bros (TADAWUL:6001) the stock advances 6.4%, bringing five-year gains to 212%

By
Simply Wall St
Published
September 02, 2021
SASE:6001
Source: Shutterstock

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Halwani Bros. Co. Ltd. (TADAWUL:6001) share price has soared 176% in the last half decade. Most would be very happy with that. It's even up 6.4% in the last week.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Halwani Bros

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Halwani Bros' earnings per share are down 3.1% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. 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.

We doubt the modest 1.3% dividend yield is attracting many buyers to the stock. The revenue growth of 2.1% per year hardly seems impressive. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.

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:6001 Earnings and Revenue Growth September 3rd 2021

We know that Halwani Bros has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Halwani Bros in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Halwani Bros the TSR over the last 5 years was 212%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Halwani Bros shareholders have received a total shareholder return of 72% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 26% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Halwani Bros better, we need to consider many other factors. Even so, be aware that Halwani Bros is showing 1 warning sign in our investment analysis , you should know about...

But note: Halwani Bros may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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