Singapore Telecommunications' (SGX:Z74) 14% CAGR outpaced the company's earnings growth over the same three-year period
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Singapore Telecommunications Limited (SGX:Z74), which is up 30%, over three years, soundly beating the market decline of 2.1% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 20% in the last year, including dividends.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Singapore Telecommunications
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.
Singapore Telecommunications was able to grow its EPS at 12% per year over three years, sending the share price higher. The average annual share price increase of 9% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. Of course, with a P/E ratio of 61.28, the market remains optimistic.
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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Singapore Telecommunications' TSR for the last 3 years was 47%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Singapore Telecommunications shareholders have received a total shareholder return of 20% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 0.8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For example, we've discovered 3 warning signs for Singapore Telecommunications (1 shouldn't be ignored!) that you should be aware of before investing here.
Of course Singapore Telecommunications may not be the best stock to buy. So you may wish to see this free 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 Singaporean exchanges.
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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.