Saudi Electricity Company (Tadawul: 5110) Shareholders may be concerned after seeing the stock price drop by 11% in the last quarter. But we will not complain about the gains over the past three years. After all, the stock has outperformed the market (52%) during that time, during which it gained 55%.
After posting solid gains in the past week, it is useful to see if longer-term returns are being driven by improving fundamentals.
View our latest analysis of Saudi Electricity
While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just core business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and earnings per share (EPS).
Saudi Electricity Company has been able to increase earnings per share by 65% annually over three years, which has driven the stock price up. The average annual stock price increase of 16% is actually less than the EPS growth. So one can reasonably conclude that the market has cooled on the stock.
Below you can see how the EPS has changed over time (find out the exact values by clicking on the image).
We know that the Saudi Electricity Company has improved its bottom line over the past three years, but what does the future hold? this is Free The interactive report on the strength of the Saudi Electricity Company’s balance sheet is a great place to start, if you want to investigate further into inventory.
What about dividends?
In addition to measuring stock price return, investors must also consider total shareholder return (TSR). TSR is a yield calculation that takes into account the value of the cash dividend (assuming any dividends received have been reinvested), the calculated value of any capital increases and discounted incidental interest. So for companies that pay generous dividends, the TSR is often much higher than the stock price return. And the TSR for Saudi Electricity’s stock over the past three years happens to be 70%, which is well above the previously mentioned share price return. This is largely the result of her dividend payments!
The shareholders of Saudi Electricity generated a total return of 3.9% for the year. Unfortunately, this falls short of a market return. Looking back more than five years, the returns are even better, coming in at 6% per year for five years. Perhaps the stock price is taking a breather while the company is implementing its growth strategy. Is Saudi Electricity cheap compared to other companies? These three evaluation measures may help you decide.
But note: Saudi Electricity may not be the best stock to buy. So take a peek at this Free A list of interesting companies that have had earnings growth in the past (and other growth forecasts).
Please note that the market returns mentioned in this article reflect the weighted average market returns of the stocks currently traded on the SA exchanges.
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This article by Simply Wall St is general in nature. We provide comments based only on historical data and analyst expectations 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, nor does it take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by essential data. Note that our analysis may not include the company’s most recent price-sensitive ads or quality materials. Wall Street simply has no position in any of the stocks mentioned.
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