Saudi Paper Manufacturing (TADAWUL:2300) pops 10% this week, taking three-year gains to 328%

By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Saudi Paper Manufacturing Company (TADAWUL:2300) share price is up 49% in the last three years, clearly besting the market return of around 30% (not including dividends).

The past week has proven to be lucrative for Saudi Paper Manufacturing investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for Saudi Paper Manufacturing

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Saudi Paper Manufacturing became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

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

It is of course excellent to see how Saudi Paper Manufacturing has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Saudi Paper Manufacturing'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 Saudi Paper Manufacturing's TSR of 328% over the last 3 years is better than the share price return.

A Different Perspective

While it's certainly disappointing to see that Saudi Paper Manufacturing shares lost 4.6% throughout the year, that wasn't as bad as the market loss of 7.2%. Longer term investors wouldn't be so upset, since they would have made 14%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. For instance, we've identified 4 warning signs for Saudi Paper Manufacturing (3 don't sit too well with us) 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 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.