Investing in QL Resources Berhad (KLSE:QL) three years ago would have delivered you a 42% gain
By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, QL Resources Berhad (KLSE:QL) shareholders have seen the share price rise 37% over three years, well in excess of the market return (2.1%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 7.6%, including dividends.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
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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 three years of share price growth, QL Resources Berhad achieved compound earnings per share growth of 21% per year. The average annual share price increase of 11% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of QL Resources Berhad's earnings, revenue and cash flow.
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. As it happens, QL Resources Berhad's TSR for the last 3 years was 42%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
It's good to see that QL Resources Berhad has rewarded shareholders with a total shareholder return of 7.6% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on QL Resources Berhad you might want to consider these 3 valuation metrics.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian 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.
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