Generally, the goal of active stock selection is to find companies that provide returns above the market average. And in our experience, buying the right stocks can significantly increase your wealth. for example, Pan United Co., Ltd. (SGX:P52)'s share price is up 69% over the past five years, clearly outpacing the market decline of around 25% (ignoring dividends). However, recent gains have been less impressive, with the share price returning just 18% in the last year, including dividends.
Let's look at the underlying fundamentals over the long term and see if they are aligned with shareholder returns.
Check out our latest analysis for PanUnited.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
During the five-year period of share price growth, Pan United achieved compound earnings per share (EPS) growth of 43% per year. The EPS growth is more impressive than the 11% annual share price increase over the same period. Therefore, we can conclude that the market as a whole is becoming more cautious towards stocks. The rather low P/E ratio of 8.61 also suggests some concerns in the market.
You can see below how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Pan United Airlines has improved its earnings over the past three years, but what does the future hold? free This interactive report on Pan United's balance sheet strength is a great starting point, if you want to investigate the stock further.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). Whereas the price/earnings ratio 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 delivered by a stock. Coincidentally, Pan United's TSR over the last five years was 108%, which is better than the share price return mentioned above. 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 Pan-United shareholders received a total shareholder return of 18% over the year. And this includes dividends. The stock appears to have performed better of late, as the 1-year TSR is better than his 5-year TSR (the latter coming in at 16% per annum). Given the share price momentum remains strong, it might be worth taking a closer look at the stock to make sure you don't miss out. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important.Case in point: we discovered 1 warning sign for PanUnited you should know.
If you want to check out another company with potentially better financials, don't miss this free A list of companies that have proven they can grow revenue.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singapore 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 using only unbiased methodologies, 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.
