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One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Nam Lee Pressed Metal Industries Limited (SGX:G0I), which is up 26%, over three years, soundly beating the market return of 9.2% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 2.5% in the last year, including dividends.
See our latest analysis for Nam Lee Pressed Metal Industries
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 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.
During the three years of share price growth, Nam Lee Pressed Metal Industries actually saw its earnings per share (EPS) drop 11% per year. Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
We doubt the dividend payments explain the share price rise, since we don’t see any improvement in that regard. Revenue has been falling at 0.4%, so that isn’t exactly encouraging. Ultimately, we can’t really explain why the share price is up, but the answer could lie in a more detailed look at the data.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Nam Lee Pressed Metal Industries, it has a TSR of 49% 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!
A Different Perspective
We’re pleased to report that Nam Lee Pressed Metal Industries shareholders have received a total shareholder return of 2.5% over one year. That’s including the dividend. However, the TSR over five years, coming in at 9.7% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on Nam Lee Pressed Metal Industries you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.