Fajarbaru Builder Group Bhd. (KLSE:FAJAR) shareholders should be happy to see the share price up 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 60% in that time, significantly under-performing the market.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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.
During the five years over which the share price declined, Fajarbaru Builder Group Bhd's earnings per share (EPS) dropped by 28% each year. This fall in the EPS is worse than the 17% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Fajarbaru Builder Group Bhd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Fajarbaru Builder Group Bhd's TSR for the last 5 years was -14%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Fajarbaru Builder Group Bhd had a tough year, with a total loss of 4.6% (including dividends), against a market gain of about 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Fajarbaru Builder Group Bhd better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Fajarbaru Builder Group Bhd (at least 1 which is potentially serious) , and understanding them should be part of your investment process.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here