The past three years for Yanbu National Petrochemical (TADAWUL:2290) investors has not been profitable

Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Yanbu National Petrochemical Company (TADAWUL:2290) shareholders, since the share price is down 46% in the last three years, falling well short of the market decline of around 3.5%.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Yanbu National Petrochemical

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, Yanbu National Petrochemical moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.

We note that the dividend has declined - a likely contributor to the share price drop. This situation was no doubt compounded by the fact revenue is down 15% per year over three years.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that Yanbu National Petrochemical has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Yanbu National Petrochemical will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Yanbu National Petrochemical's TSR for the last 3 years was -38%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Yanbu National Petrochemical shareholders have received a total shareholder return of 12% over the last year. That's including the dividend. That's better than the annualised return of 0.6% 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. It's always interesting to track share price performance over the longer term. But to understand Yanbu National Petrochemical better, we need to consider many other factors. For example, we've discovered 1 warning sign for Yanbu National Petrochemical that you should be aware of before investing here.

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.