We think all investors should try to buy and hold high quality multi-year winners. While the best companies are hard to find, but they can generate massive returns over long periods. To wit, the Hor Kew Corporation Limited (SGX:BBP) share price has soared 515% over five years. And this is just one example of the epic gains achieved by some long term investors. It’s also good to see the share price up 87% over the last quarter. We love happy stories like this one. The company should be really proud of that performance!
After a strong gain in the past week, it’s worth seeing if longer term returns have been driven by improving fundamentals.
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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.
Over half a decade, Hor Kew managed to grow its earnings per share at 72% a year. The EPS growth is more impressive than the yearly share price gain of 44% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.78.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Hor Kew’s key metrics by checking this interactive graph of Hor Kew’s earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Hor Kew’s TSR for the last 5 years was 542%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
It’s nice to see that Hor Kew shareholders have received a total shareholder return of 168% over the last year. And that does include the dividend. That’s better than the annualised return of 45% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Hor Kew is showing 1 warning sign in our investment analysis , you should know about…