Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Bermaz Auto Berhad (KLSE:BAUTO) share price is up 25% in the last 1 year, clearly besting the market decline of around 5.8% (not including dividends). That's a solid performance by our standards! However, the longer term returns haven't been so impressive, with the stock up just 2.0% in the last three years.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Bermaz Auto Berhad
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the last year Bermaz Auto Berhad grew its earnings per share (EPS) by 72%. It's fair to say that the share price gain of 25% did not keep pace with the EPS growth. So it seems like the market has cooled on Bermaz Auto Berhad, despite the growth. Interesting. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.37.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Bermaz Auto Berhad has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Bermaz Auto Berhad, it has a TSR of 36% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Bermaz Auto Berhad shareholders have received a total shareholder return of 36% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 1 warning sign for Bermaz Auto Berhad that you should be aware of before investing here.