City Cement's (TADAWUL:3003) earnings growth rate lags the 12% CAGR delivered to shareholders

The last three months have been tough on City Cement Company (TADAWUL:3003) shareholders, who have seen the share price decline a rather worrying 32%. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 41%, less than the market return of 50%.

Although City Cement has shed ر.س196m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for City Cement

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Over half a decade, City Cement managed to grow its earnings per share at 9.9% a year. This EPS growth is higher than the 7% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that City Cement has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for City Cement the TSR over the last 5 years was 73%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in City Cement had a tough year, with a total loss of 15% (including dividends), against a market gain of about 2.9%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand City Cement better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with City Cement , and understanding them should be part of your investment process.

We will like City Cement better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.