By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Mitrajaya Holdings Berhad (KLSE:MITRA) shareholders have seen the share price rise 34% over three years, well in excess of the market return (8.1%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 28%, including dividends.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Mitrajaya Holdings Berhad
While Mitrajaya Holdings Berhad made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. Generally speaking, we’d consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
Mitrajaya Holdings Berhad’s revenue trended up 0.3% each year over three years. Considering the company is losing money, we think that rate of revenue growth is uninspiring. The modest growth is probably broadly reflected in the share price, which is up 10%, per year over 3 years. Ultimately, the important thing is whether the company is trending to profitability. In this sort of situation it can be worth putting the stock on your watchlist. If it can become profitable, then even moderate revenue growth could grow profits quickly.
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 Mitrajaya Holdings Berhad stock, you should check out this FREE detailed report on its balance sheet.
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 Mitrajaya Holdings Berhad the TSR over the last 3 years was 41%, 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!
