By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, SD Guthrie Berhad (KLSE:SDG) shareholders have seen the share price rise 41% over three years, well in excess of the market return (6.6%, not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 14% in the last year, including dividends.
Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.
Check out our latest analysis for SD Guthrie 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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last three years, SD Guthrie Berhad failed to grow earnings per share, which fell 6.4% (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.
Languishing at just 1.9%, we doubt the dividend is doing much to prop up the share price. Do you think that shareholders are buying for the 1.0% per annum revenue growth trend? We don’t. So truth be told we can’t see an easy explanation for the share price action, but perhaps you can…
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
SD Guthrie Berhad is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think SD Guthrie Berhad will earn in the future (free analyst consensus estimates)
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, SD Guthrie Berhad’s TSR for the last 3 years was 57%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
It’s nice to see that SD Guthrie Berhad shareholders have received a total shareholder return of 14% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. To that end, you should be aware of the 2 warning signs we’ve spotted with SD Guthrie Berhad .
