One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Fraser & Neave Holdings Bhd (KLSE:F&N) share price is up 55% in the last three years, clearly besting the market return of around 11% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 18% in the last year, including dividends.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
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While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 three years of share price growth, Fraser & Neave Holdings Bhd achieved compound earnings per share growth of 9.9% per year. This EPS growth is lower than the 16% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
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 Fraser & Neave Holdings Bhd’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Fraser & Neave Holdings Bhd’s TSR for the last 3 years was 68%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
We’re pleased to report that Fraser & Neave Holdings Bhd shareholders have received a total shareholder return of 18% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It’s always interesting to track share price performance over the longer term. But to understand Fraser & Neave Holdings Bhd better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Fraser & Neave Holdings Bhd you should know about.