Eastern Province Cement (TADAWUL:3080) Has Compensated Shareholders With A Respectable 90% Return On Their Investment

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Eastern Province Cement Co. (TADAWUL:3080) shareholders have seen the share price rise 69% over three years, well in excess of the market return (16%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21% , including dividends .

See our latest analysis for Eastern Province Cement

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Eastern Province Cement was able to grow its EPS at 14% per year over three years, sending the share price higher. This EPS growth is lower than the 19% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

We know that Eastern Province Cement has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Eastern Province Cement's TSR for the last 3 years was 90%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Eastern Province Cement shareholders have received a total shareholder return of 21% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Eastern Province Cement (1 doesn't sit too well with us) that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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