Yahoo Finance Investing in RHB Bank Berhad (KLSE:RHBBANK) three years ago would have delivered you a 33% gain
One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the RHB Bank Berhad (KLSE:RHBBANK) share price is up 11% in the last three years, clearly besting the market decline of around 0.5% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 5.9% in the last year , including dividends .
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for RHB Bank 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.
RHB Bank Berhad was able to grow its EPS at 8.8% per year over three years, sending the share price higher. This EPS growth is higher than the 3% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.02.
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 RHB Bank Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for RHB Bank Berhad the TSR over the last 3 years was 33%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
RHB Bank Berhad provided a TSR of 5.9% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 6% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand RHB Bank Berhad better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with RHB Bank Berhad , and understanding them should be part of your investment process.
We will like RHB Bank Berhad better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
