Investors three-year losses continue as Southern Province Cement (TADAWUL:3050) dips a further 3.6% this week, earnings continue to decline

Investing in stocks inevitably means buying into some companies that perform poorly. Long term Southern Province Cement Company (TADAWUL:3050) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 58% drop in the share price over that period. And over the last year the share price fell 28%, so we doubt many shareholders are delighted.

With the stock having lost 3.6% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Southern Province Cement

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 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 the three years that the share price fell, Southern Province Cement's earnings per share (EPS) dropped by 29% each year. This change in EPS is reasonably close to the 25% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Southern Province Cement'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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Southern Province Cement the TSR over the last 3 years was -54%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 2.6% in the twelve months, Southern Province Cement shareholders did even worse, losing 26% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Southern Province Cement better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Southern Province Cement you should know about.

But note: Southern Province Cement may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com