Optimism around Al Sagr Cooperative Insurance (TADAWUL:8180) delivering new earnings growth may be shrinking as stock declines 11% this past week

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Al Sagr Cooperative Insurance Company (TADAWUL:8180) have tasted that bitter downside in the last year, as the share price dropped 61%. That contrasts poorly with the market decline of 9.9%. Even if you look out three years, the returns are still disappointing, with the share price down61% in that time. Shareholders have had an even rougher run lately, with the share price down 31% in the last 90 days.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

We've discovered 1 warning sign about Al Sagr Cooperative Insurance. View them for free.

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. 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.

Unhappily, Al Sagr Cooperative Insurance had to report a 58% decline in EPS over the last year. This change in EPS is remarkably close to the 61% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Instead, the change in the share price seems to reduction in earnings per share, alone.

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

Dive deeper into Al Sagr Cooperative Insurance's key metrics by checking this interactive graph of Al Sagr Cooperative Insurance's earnings, revenue and cash flow.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Al Sagr Cooperative Insurance's total shareholder return (TSR) and its share price return. 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. Its history of dividend payouts mean that Al Sagr Cooperative Insurance's TSR, which was a 41% drop over the last 1 year, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 9.9% in the twelve months, Al Sagr Cooperative Insurance shareholders did even worse, losing 41%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Case in point: We've spotted 1 warning sign for Al Sagr Cooperative Insurance you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.