Yahoo Finance Investors in Bermaz Auto Berhad (KLSE:BAUTO) have seen stellar returns of 104% over the past three years
By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Bermaz Auto Berhad (KLSE:BAUTO) shareholders have seen the share price rise 62% over three years, well in excess of the market return (9.0%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 26%, 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.
See our latest analysis for Bermaz Auto Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years of share price growth, Bermaz Auto Berhad achieved compound earnings per share growth of 38% per year. This EPS growth is higher than the 17% 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 8.35.
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 Bermaz Auto Berhad has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Bermaz Auto Berhad's financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bermaz Auto Berhad the TSR over the last 3 years was 104%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Bermaz Auto Berhad's TSR for the year was broadly in line with the market average, at 26%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 6% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. Take risks, for example - Bermaz Auto Berhad has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about.
We will like Bermaz Auto Berhad better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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
