Many investors define successful investing as beating the market average over the long term. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term TASCO Berhad (KLSE:TASCO) shareholders, since the share price is down 46% in the last three years, falling well short of the market return of around 24%. And more recent buyers are having a tough time too, with a drop of 39% in the last year.
So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.
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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
TASCO Berhad saw its EPS decline at a compound rate of 27% per year, over the last three years. In comparison the 18% compound annual share price decline isn’t as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on TASCO Berhad’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share 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 raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of TASCO Berhad, it has a TSR of -40% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
Investors in TASCO Berhad had a tough year, with a total loss of 37% (including dividends), against a market gain of about 0.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 9%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. To that end, you should be aware of the 3 warning signs we’ve spotted with TASCO Berhad .