While shareholders of Saudi Real Estate (TADAWUL:4020) are in the black over 5 years, those who bought a week ago aren't so fortunate

When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Saudi Real Estate Company (TADAWUL:4020) share price is up 95% in the last 5 years, clearly besting the market return of around 35% (ignoring dividends).

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Check out our latest analysis for Saudi Real Estate

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 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.

During the five years of share price growth, Saudi Real Estate moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.

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

We know that Saudi Real Estate has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Saudi Real Estate's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Saudi Real Estate's total shareholder return (TSR) and its share price return. 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. Saudi Real Estate's TSR of 125% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We're pleased to report that Saudi Real Estate shareholders have received a total shareholder return of 93% over one year. That's better than the annualised return of 18% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Saudi Real Estate better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Saudi Real Estate you should be aware of, and 1 of them shouldn't be ignored.

Of course Saudi Real Estate may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.