These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Gamuda Berhad (KLSE:GAMUDA) share price is 34% higher than it was a year ago, much better than the market decline of around 2.5% (not including dividends) in the same period. That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 3.2% in three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Gamuda Berhad
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
Gamuda Berhad was able to grow EPS by 108% in the last twelve months. This EPS growth is significantly higher than the 34% increase in the share price. Therefore, it seems the market isn't as excited about Gamuda Berhad as it was before. This could be an opportunity.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Gamuda Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Gamuda Berhad the TSR over the last 1 year was 39%, 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
We're pleased to report that Gamuda Berhad shareholders have received a total shareholder return of 39% over one year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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 2 warning signs for Gamuda Berhad that you should be aware of before investing here.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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