Stock Analysis

Did You Participate In Any Of Yanbu Cement's (TADAWUL:3060) Respectable 64% Return?

SASE:3060
Source: Shutterstock

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Yanbu Cement Company (TADAWUL:3060) share price is up 37% in the last three years, clearly besting the market return of around 18% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.8% in the last year , including dividends .

Check out our latest analysis for Yanbu Cement

There is no denying that markets are sometimes efficient, but prices do not always reflect 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 the three years of share price growth, Yanbu Cement actually saw its earnings per share (EPS) drop 3.5% per year.

Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. Therefore, it makes sense to look into other metrics.

We note that the dividend is higher than it was preciously, so that may have assisted the share price. It could be that the company is reaching maturity and dividend investors are buying for the yield. The revenue growth of about 3.3% per year might also encourage buyers.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
SASE:3060 Earnings and Revenue Growth November 27th 2020

We know that Yanbu Cement has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling Yanbu Cement stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Yanbu Cement the TSR over the last 3 years was 64%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Yanbu Cement shareholders are up 8.8% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Yanbu 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 Yanbu Cement , and understanding them should be part of your investment process.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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. 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.
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