A Look At Arabian Centres' (TADAWUL:4321) Share Price Returns

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Arabian Centres Company (TADAWUL:4321) share price slid 13% over twelve months. That's disappointing when you consider the market returned 13%. Arabian Centres hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time.

View our latest analysis for Arabian Centres

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 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.

Unfortunately Arabian Centres reported an EPS drop of 54% for the last year. This fall in the EPS is significantly worse than the 13% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Arabian Centres' TSR for the last year was -8.5%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While Arabian Centres shareholders are down 8.5% for the year (even including dividends), the market itself is up 13%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. With the stock down 3.6% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Arabian Centres better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Arabian Centres you should be aware of, and 1 of them is a bit unpleasant.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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