Stock pickers are typically looking for stocks that outperform the overall market. And the truth is, if you buy a quality business at the right price, you can make big profits.For example, in the long run Kenanga Investment Bank Berhad (KLSE:KENANGA) shareholders have enjoyed an 84% share price increase over the past five years, significantly outpacing the market return of around 1.2% (not including dividends). On the other hand, recent profits have been less impressive, with shareholders only getting a return of 27%, including dividends.
It's also worth looking at the company's fundamentals here. That's because it helps determine whether long-term shareholder returns are in line with the performance of the underlying business.
Check out our latest analysis for Kenanga Investment Bank Berhad.
While there is no denying that markets are sometimes efficient, prices do not always reflect underlying company performance. One way he looks at how market sentiment has changed over time is to look at the interaction between a company's stock price and his earnings per share (EPS).
Kenanga Investment Bank Berhad managed to grow its earnings per share at 43% per year over five years. This EPS growth is higher than the average annual increase in stock price of 13%. So the market doesn't seem to be too enthusiastic about this stock lately. The rather low P/E ratio of 10.70 also suggests some concerns in the market.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Learn more about Kenanga Investment Bank Berhad's key metrics by checking this interactive graph of Kenanga Investment Bank Berhad's earnings, revenue and cash flow.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital increases and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. For Kenanga Investment Bank Berhad, the TSR for the last 5 years is 146%. This exceeds the stock return mentioned earlier. And there's no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
We're pleased to report that Kenanga Investment Bank Berhad shareholders received a total shareholder return of 27% over one year. And this includes dividends. This growth rate is better than the five-year annual TSR (20%). So sentiment around the company seems to be positive lately. Optimists might think that the recent improvement in TSR indicates that the business itself is improving over time. I think it's very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. For example, we identified 1 warning sign for Kenanga Investment Bank Berhad What you need to know.
of course Kenanga Investment Bank 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.
