Statistically speaking, long term investing is a profitable endeavour. But along the way some stocks are going to perform badly. For example, after five long years the Beshom Holdings Berhad (KLSE:BESHOM) share price is a whole 72% lower. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 33%.
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 Beshom Holdings 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 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, Beshom Holdings Berhad's earnings per share (EPS) dropped by 30% each year. This fall in the EPS is worse than the 23% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.
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 Beshom Holdings Berhad'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Beshom Holdings Berhad, it has a TSR of -64% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Beshom Holdings Berhad had a tough year, with a total loss of 29% (including dividends), against a market gain of about 8.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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 Beshom Holdings Berhad better, we need to consider many other factors. Take risks, for example - Beshom Holdings Berhad has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.