Saudi Steel Pipes' (TADAWUL:1320) 180% YoY earnings expansion surpassed the shareholder returns over the past year

When you buy shares in a company, there is always a risk that the price drops to zero. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Saudi Steel Pipes Company (TADAWUL:1320) share price has soared 135% return in just a single year. It's also good to see the share price up 38% over the last quarter. And shareholders have also done well over the long term, with an increase of 65% in the last three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for Saudi Steel Pipes

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 last year Saudi Steel Pipes grew its earnings per share (EPS) by 180%. This EPS growth is significantly higher than the 135% increase in the share price. Therefore, it seems the market isn't as excited about Saudi Steel Pipes as it was before. This could be an opportunity.

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

It is of course excellent to see how Saudi Steel Pipes has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Saudi Steel Pipes stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's nice to see that Saudi Steel Pipes shareholders have received a total shareholder return of 135% over the last year. That's better than the annualised return of 13% 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. For instance, we've identified 4 warning signs for Saudi Steel Pipes (1 is potentially serious) that you should be aware of.

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.

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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.