Abu Dhabi Commercial Bank PJSC’s (ADX:ADCB) five-year total shareholder return exceeds underlying earnings growth

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Also, you would generally like to see the stock price rise faster than the market. But Abu Dhabi Commercial Bank PJSC (ADX:ADCB) fell short of this second goal, with the stock price rising 25% over five years, which is below market performance. However, if you include dividends, the yield is above the market. Over the past twelve months, the stock price has risen a very respectable 17%.

Given that long-term performance has been good but there has been a recent pullback of 3.6%, let’s see if the fundamentals match the stock price.

However, if you prefer to see where opportunities and risks are within the ADCB industryyou can check out our analysis on the AE banking industry.

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.

Over five years of share price growth, Abu Dhabi Commercial Bank PJSC has achieved compound earnings per share (EPS) growth of 1.1% per annum. This EPS growth is less than the average annual share price increase of 5%. This suggests that market players hold the company in high regard these days. And that’s hardly shocking given the track record of growth.

You can see below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

ADX:ADCB Earnings Per Share Growth September 7, 2022

We know that Abu Dhabi Commercial Bank PJSC recently improved its results, but will it increase its income? This free report showing analyst revenue forecasts should help you determine whether EPS growth can be sustained.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. It turns out that Abu Dhabi Commercial Bank PJSC’s TSR for the last 5 years was 63%, which exceeds the previously mentioned share price return. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

Abu Dhabi Commercial Bank PJSC’s shareholding is up 22% over the year (even including dividends). But this yield is lower than the market. On the bright side, it’s still a gain, and it’s actually better than the 10% average return over half a decade. This suggests that the business could improve over time. It is always interesting to follow the evolution of the share price over the long term. But to better understand Abu Dhabi Commercial Bank PJSC, we need to consider many other factors. Consider the risks, for example. Every business has them, and we’ve spotted 1 warning sign for Abu Dhabi Commercial Bank PJSC you should know.

But note: Abu Dhabi Commercial Bank PJSC may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the market-weighted average returns of the stocks currently trading on the AE exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Calculation of discounted cash flows for each share

Simply Wall St performs a detailed calculation of discounted cash flow every 6 hours for every stock in the market, so if you want to find the intrinsic value of any company, just search here. It’s free.

About the author