Saudi Arabian Cooperative Insurance (TADAWUL:8100) shareholder returns have been notable, earning 68% in 5 years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Saudi Arabian Cooperative Insurance Company (TADAWUL:8100) shareholders have enjoyed a 68% share price rise over the last half decade, well in excess of the market return of around 20% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 37%.

Since the stock has added ر.س56m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Saudi Arabian Cooperative Insurance

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years of share price growth, Saudi Arabian Cooperative Insurance moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Saudi Arabian Cooperative Insurance share price is down 23% in the last three years. During the same period, EPS grew by 14% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -8% a year for three years.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

This free interactive report on Saudi Arabian Cooperative Insurance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

We're pleased to report that Saudi Arabian Cooperative Insurance shareholders have received a total shareholder return of 37% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% 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 Saudi Arabian Cooperative Insurance better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Saudi Arabian Cooperative Insurance (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

But note: Saudi Arabian Cooperative Insurance 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 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.

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