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. For example, the Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST) share price is up 78% in the last three years, clearly besting the market return of around 46% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 11% in the last year , including dividends .
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Abu Dhabi National Oil Company for Distribution PJSC was able to grow its EPS at 5.2% per year over three years, sending the share price higher. In comparison, the 21% per year gain in the share price outpaces the EPS growth. So it’s fair to assume the market has a higher opinion of the business than it did three years ago. That’s not necessarily surprising considering the three-year track record of earnings growth.
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 Abu Dhabi National Oil Company for Distribution PJSC has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
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. In the case of Abu Dhabi National Oil Company for Distribution PJSC, it has a TSR of 111% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Abu Dhabi National Oil Company for Distribution PJSC produced a TSR of 11% over the last year. While you don’t go broke making a profit, this return was actually lower than the average market return of about 48%. At least the longer term returns (running at about 28% a year, are better. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. It’s always interesting to track share price performance over the longer term. But to understand Abu Dhabi National Oil Company for Distribution PJSC better, we need to consider many other factors. For instance, we’ve identified 2 warning signs for Abu Dhabi National Oil Company for Distribution PJSC (1 can’t be ignored) that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AE 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.