Fraser & Neave Holdings Bhd (KLSE:F&N) shareholders should be happy to see the share price up 28% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 23% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
On a more encouraging note the company has added RM484m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
During the three years that the share price fell, Fraser & Neave Holdings Bhd's earnings per share (EPS) dropped by 2.3% each year. The share price decline of 8% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Fraser & Neave Holdings Bhd's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fraser & Neave Holdings Bhd's TSR for the last 3 years was -18%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Fraser & Neave Holdings Bhd shareholders have received a total shareholder return of 7.4% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.1% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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 instance, we've identified 1 warning sign for Fraser & Neave Holdings Bhd that you should be aware of.
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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