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By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. Just take a look at Bumitama Agri Ltd. (SGX:P8Z), which is up 66%, over three years, soundly beating the market return of 5.8% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 65%, including dividends.
Since the stock has added S$139m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Bumitama Agri
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.
Bumitama Agri was able to grow its EPS at 22% per year over three years, sending the share price higher. The average annual share price increase of 18% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.87.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Bumitama Agri has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Bumitama Agri will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Bumitama Agri's TSR for the last 3 years was 122%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Bumitama Agri has rewarded shareholders with a total shareholder return of 65% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 Bumitama Agri that you should be aware of.