Investing in Zhulian Corporation Berhad (KLSE:ZHULIAN) three years ago would have delivered you a 90% gain
By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, Zhulian Corporation Berhad (KLSE:ZHULIAN) shareholders have seen the share price rise 44% over three years, well in excess of the market decline (6.9%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 3.3% , 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 Zhulian Corporation 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 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.
Over the last three years, Zhulian Corporation Berhad failed to grow earnings per share, which fell 25% (annualized).
So we doubt that the market is looking to EPS for its main judge of the company’s value. Therefore, we think it’s worth considering other metrics as well.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Zhulian Corporation Berhad stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Zhulian Corporation Berhad the TSR over the last 3 years was 90%, 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
Zhulian Corporation Berhad shareholders gained a total return of 3.3% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 15% per year for five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. Take risks, for example – Zhulian Corporation Berhad has 4 warning signs (and 2 which don’t sit too well with us) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian 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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