By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Boustead Projects Limited (SGX:AVM) share price is up 47% in the last three years, clearly besting than the market return of around 11% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21%, including dividends.
See our latest analysis for Boustead Projects
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 three years of share price growth, Boustead Projects achieved compound earnings per share growth of 7.7% per year. In comparison, the 14% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. That's not necessarily surprising considering the three-year track record of earnings growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. We note that for Boustead Projects the TSR over the last 3 years was 53%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Boustead Projects shareholders have gained 21% (in total) over the last year. That includes the value of the dividend. That gain actually surpasses the 15% TSR it generated (per year) over three years. The improving returns to shareholders suggests the stock is becoming more popular with time. Before forming an opinion on Boustead Projects you might want to consider these 3 valuation metrics.