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, Padini Holdings Berhad (KLSE:PADINI) shareholders have seen the share price rise 60% over three years, well in excess of the market decline (4.0%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 25% in the last year , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Padini Holdings Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Padini Holdings Berhad was able to grow its EPS at 44% per year over three years, sending the share price higher. This EPS growth is higher than the 17% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.61.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Padini Holdings Berhad has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Padini Holdings Berhad stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Padini Holdings Berhad the TSR over the last 3 years was 73%, 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 good to see that Padini Holdings Berhad has rewarded shareholders with a total shareholder return of 25% in the last twelve months. That's including the dividend. Notably the five-year annualised TSR loss of 4% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand Padini Holdings Berhad better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Padini Holdings Berhad you should be aware of, and 1 of them is concerning.