It might be of some concern to shareholders to see the National Gypsum Company (TADAWUL:2090) share price down 14% in the last month. But in three years the returns have been great. The share price marched upwards over that time, and is now 122% higher than it was. To some, the recent share price pullback wouldn't be surprising after such a good run. If the business can perform well for years to come, then the recent drop could be an opportunity.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
National Gypsum was able to grow its EPS at 21% per year over three years, sending the share price higher. This EPS growth is lower than the 30% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This optimism is also reflected in the fairly generous P/E ratio of 100.34.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on National Gypsum's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for National Gypsum the TSR over the last 3 years was 133%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in National Gypsum had a tough year, with a total loss of 47% (including dividends), against a market gain of about 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand National Gypsum better, we need to consider many other factors. Even so, be aware that National Gypsum is showing 3 warning signs in our investment analysis , and 2 of those are concerning...
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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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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.
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