The one-year earnings decline has likely contributed toAsh-Sharqiyah Development's (TADAWUL:6060) shareholders losses of 21% over that period

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Ash-Sharqiyah Development Co. (TADAWUL:6060) share price is down 70% in the last year. That's well below the market decline of 12%. Notably, shareholders had a tough run over the longer term, too, with a drop of 56% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 56% in thirty days.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Ash-Sharqiyah Development

Ash-Sharqiyah Development didn't have any revenue in the last year, so it's fair to say it doesn't yet have a proven product (or at least not one people are paying for). We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? So it seems that the investors focused more on what could be, than paying attention to the current revenues (or lack thereof). It seems likely some shareholders believe that Ash-Sharqiyah Development will significantly advance the business plan before too long.

As a general rule, if a company doesn't have much revenue, and it loses money, then it is a high risk investment. You should be aware that there is always a chance that this sort of company will need to issue more shares to raise money to continue pursuing its business plan. While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). Ash-Sharqiyah Development has already given some investors a taste of the bitter losses that high risk investing can cause.

Our data indicates that Ash-Sharqiyah Development had ر.س45m more in total liabilities than it had cash, when it last reported in December 2022. That makes it extremely high risk, in our view. But since the share price has dived 70% in the last year , it looks like some investors think it's time to abandon ship, so to speak. You can see in the image below, how Ash-Sharqiyah Development's cash levels have changed over time (click to see the values).

In reality it's hard to have much certainty when valuing a business that has neither revenue or profit. Would it bother you if insiders were selling the stock? I'd like that just about as much as I like to drink milk and fruit juice mixed together. You can click here to see if there are insiders selling.

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between Ash-Sharqiyah Development's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Ash-Sharqiyah Development hasn't been paying dividends, but its TSR of -21% exceeds its share price return of -70%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.

A Different Perspective

We regret to report that Ash-Sharqiyah Development shareholders are down 21% for the year. Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 4%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Ash-Sharqiyah Development has 4 warning signs (and 3 which are concerning) we think you should know about.

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 Saudi 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.