Greatech Technology Berhad (KLSE:GREATEC) jumps 4.2% this week, though earnings growth is still tracking behind five-year shareholder returns
Buying shares in the best businesses can build meaningful wealth for you and your family. While the best companies are hard to find, but they can generate massive returns over long periods. For example, the Greatech Technology Berhad (KLSE:GREATEC) share price is up a whopping 977% in the last half decade, a handsome return for long term holders. And this is just one example of the epic gains achieved by some long term investors. It's also good to see the share price up 29% over the last quarter. It really delights us to see such great share price performance for investors.
Since the stock has added RM292m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Greatech Technology Berhad
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During five years of share price growth, Greatech Technology Berhad achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is lower than the 61% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 45.59.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Greatech Technology Berhad's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Greatech Technology Berhad's TSR for the year was broadly in line with the market average, at 23%. It has to be noted that the recent return falls short of the 61% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Greatech Technology Berhad , and understanding them should be part of your investment process.
But note: Greatech Technology Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com