Arriyadh Development (TADAWUL:4150) Has Compensated Shareholders With A Respectable 75% Return On Their Investment

By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Arriyadh Development Co. (TADAWUL:4150), which is up 44%, over three years, soundly beating the market return of 20% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 29% in the last year , including dividends .

View our latest analysis for Arriyadh Development

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Arriyadh Development achieved compound earnings per share growth of 0.9% per year. In comparison, the 13% per year gain in the share price outpaces the EPS growth. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

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 Arriyadh Development'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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Arriyadh Development's TSR for the last 3 years was 75%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Arriyadh Development shareholders have received a total shareholder return of 29% over one year. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For instance, we've identified 2 warning signs for Arriyadh Development (1 is significant) that you should be aware of.

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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