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For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term China Aviation Oil (Singapore) Corporation Ltd (SGX:G92) shareholders for doubting their decision to hold, with the stock down 33% over a half decade.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for China Aviation Oil (Singapore)
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 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.
Looking back five years, both China Aviation Oil (Singapore)'s share price and EPS declined; the latter at a rate of 2.5% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 8% per year, over the period. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 6.93.
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. It might be well worthwhile taking a look at our free report on China Aviation Oil (Singapore)'s earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of China Aviation Oil (Singapore), it has a TSR of -21% 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
China Aviation Oil (Singapore) shareholders gained a total return of 14% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 4% per year, over five years. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that China Aviation Oil (Singapore) is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...