Those who invested in YAMAMA Cement (TADAWUL:3020) five years ago are up 61%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the YAMAMA Cement share price has climbed 48% in five years, easily topping the market return of 34% (ignoring dividends).

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for YAMAMA Cement

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, YAMAMA Cement achieved compound earnings per share (EPS) growth of 28% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

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

It might be well worthwhile taking a look at our free report on YAMAMA Cement's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, YAMAMA Cement's TSR for the last 5 years was 61%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's certainly disappointing to see that YAMAMA Cement shares lost 4.0% throughout the year, that wasn't as bad as the market loss of 5.2%. Longer term investors wouldn't be so upset, since they would have made 10%, 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. To that end, you should be aware of the 1 warning sign we've spotted with YAMAMA Cement .

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.