In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Malakoff Corporation Berhad (KLSE:MALAKOF) shareholders have had that experience, with the share price dropping 30% in three years, versus a market decline of about 3.8%.
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.
View our latest analysis for Malakoff Corporation Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
Over the three years that the share price declined, Malakoff Corporation Berhad's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Malakoff Corporation Berhad's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Malakoff Corporation Berhad's TSR for the last 3 years was -15%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Malakoff Corporation Berhad shareholders are up 2.0% for the year (even including dividends). But that was short of the market average. If we look back over five years, the returns are even better, coming in at 2% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 instance, we've identified 2 warning signs for Malakoff Corporation Berhad (1 is concerning) that you should be aware of.