Investing in Middle East Healthcare (TADAWUL:4009) five years ago would have delivered you a 187% gain

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Middle East Healthcare Company (TADAWUL:4009) share price has soared 187% in the last half decade. Most would be very happy with that. In the last week shares have slid back 2.8%.

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

See our latest analysis for Middle East Healthcare

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 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).

During five years of share price growth, Middle East Healthcare achieved compound earnings per share (EPS) growth of 21% per year. So the EPS growth rate is rather close to the annualized share price gain of 23% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Middle East Healthcare has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Middle East Healthcare's financial health with this free report on its balance sheet.

A Different Perspective

It's good to see that Middle East Healthcare has rewarded shareholders with a total shareholder return of 30% in the last twelve months. That's better than the annualised return of 23% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Middle East Healthcare (of which 1 is potentially serious!) you should know about.

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 Saudi exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.