The three-year decline in earnings for Al-Jouf Agricultural Development TADAWUL:6070) isn't encouraging, but shareholders are still up 269% over that period

By
Simply Wall St
Published
October 11, 2021
SASE:6070
Source: Shutterstock

Al-Jouf Agricultural Development Co. (TADAWUL:6070) shareholders might be concerned after seeing the share price drop 19% in the last month. But that doesn't change the fact that the returns over the last three years have been very strong. Indeed, the share price is up a very strong 231% in that time. So the recent fall in the share price should be viewed in that context. The thing to consider is whether the underlying business is doing well enough to support the current price.

In light of the stock dropping 8.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.

View our latest analysis for Al-Jouf Agricultural Development

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Al-Jouf Agricultural Development moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
SASE:6070 Earnings Per Share Growth October 12th 2021

Dive deeper into Al-Jouf Agricultural Development's key metrics by checking this interactive graph of Al-Jouf Agricultural Development's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Al-Jouf Agricultural Development's TSR for the last 3 years was 269%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Al-Jouf Agricultural Development shareholders have received a total shareholder return of 74% over the last year. That's including the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 3 warning signs for Al-Jouf Agricultural Development (1 is a bit concerning!) that you should be aware of before investing here.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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