Stock pickers are typically looking for stocks that outperform the overall market. And in our experience, buying the right stocks can significantly increase your wealth.For example, in the long run IGB Berhad (KLSE:IGBB) shareholders have enjoyed a 41% share price increase over the past five years, significantly outpacing the market return of around 1.3% (not including dividends). However, recent gains have been less impressive, with the share price returning just 25% in the last year, including dividends.
With that in mind, it’s worth checking whether a company’s underlying fundamentals are driving its long-term performance, or if there are any discrepancies.
Check out our latest analysis for IGB Berhad.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
IGB Berhad’s earnings per share have declined by 0.3% per year, despite the company’s strong five-year share price performance.
Therefore, it’s hard to argue that earnings per share is the best metric to judge a company as profits may not be optimal at this point. Since changes in EPS don’t seem to correlate with changes in share price, it’s worth looking at other metrics.
I’m not particularly impressed with the 1.2% annual compound return increase over five years. So it seems we need to take a closer look at earnings and revenue trends to see how they impact the share price.
The image below shows how earnings and revenue have changed over time (unveil the exact values ​​by clicking on the image).
It is of course great to see how IGB Berhad has grown its profits over the years, but the future is more important to shareholders.this free This interactive report on IGB Berhad’s balance sheet strength is a great starting point, if you want to investigate the stock further.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). Whereas the price/earnings ratio 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. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. We note that IGB Berhad’s TSR over the last five years was 61%, which is better than the share price return mentioned above. Therefore, the dividend paid by the company is total Shareholder returns.
different perspective
It’s good to see that IGB Berhad returned a total return of 25% to shareholders over the last twelve months. That includes dividends. The stock appears to have performed better of late, as the 1-year TSR is better than his 5-year TSR (the latter at 10% per annum). Optimists might think that the recent improvement in TSR indicates that the business itself is improving over 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. for that purpose, two warning signs We found them at IGB Berhad (including one important one).
of course IGB Berhad may not be the best stock to buy.So you might want to see this free A collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
