Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Datasonic Group Berhad (KLSE:DSONIC) shareholders have had that experience, with the share price dropping 39% in three years, versus a market decline of about 11%. In contrast, the stock price has popped 8.2% in the last thirty days.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Datasonic Group Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 unfortunate three years of share price decline, Datasonic Group Berhad actually saw its earnings per share (EPS) improve by 6.4% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. It's good to see that Datasonic Group Berhad has increased its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Datasonic Group Berhad has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Datasonic Group Berhad in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Datasonic Group Berhad the TSR over the last 3 years was -36%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!