United International Transportation's (TADAWUL:4260) five-year earnings growth trails the solid shareholder returns

By
Simply Wall St
Published
October 17, 2021
SASE:4260
Source: Shutterstock

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. Long term United International Transportation Company (TADAWUL:4260) shareholders would be well aware of this, since the stock is up 149% in five years. On top of that, the share price is up 13% in about a quarter. But this could be related to the strong market, which is up 7.3% in the last three months.

Since the stock has added ر.س228m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for United International Transportation

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, United International Transportation managed to grow its earnings per share at 3.6% a year. This EPS growth is slower than the share price growth of 20% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

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

earnings-per-share-growth
SASE:4260 Earnings Per Share Growth October 18th 2021

We know that United International Transportation has improved its bottom line lately, but is it going to grow revenue? Check if analysts think United International Transportation will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, United International Transportation's TSR for the last 5 years was 210%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that United International Transportation shareholders have received a total shareholder return of 43% over one year. And that does include the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - United International Transportation has 1 warning sign we think 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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