Unless you borrow money to invest, the potential losses are limited. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Kencana Agri Limited (SGX:BNE). Its share price is already up an impressive 286% in the last twelve months. Also pleasing for shareholders was the 193% gain in the last three months. And shareholders have also done well over the long term, with an increase of 59% in the last three years.
So let’s assess the underlying fundamentals over the last 1 year and see if they’ve moved in lock-step with shareholder returns.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the last year Kencana Agri grew its earnings per share, moving from a loss to a profit.
The result looks like a strong improvement to us, so we’re not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Kencana Agri’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
It’s nice to see that Kencana Agri shareholders have received a total shareholder return of 286% over the last year. That’s better than the annualised return of 26% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 Kencana Agri (1 shouldn’t be ignored!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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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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.