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By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Brook Crompton Holdings Ltd. (SGX:AWC) share price is up 100% in the last three years, clearly besting than the market return of around 15% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 1.6% in the last year, including dividends.
View our latest analysis for Brook Crompton Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Brook Crompton Holdings was able to grow its EPS at 20% per year over three years, sending the share price higher. This EPS growth is lower than the 26% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It is quite common to see investors become enamoured with a business, after a few years of solid progress.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Brook Crompton Holdings's earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Brook Crompton Holdings's TSR for the last 3 years was 120%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Brook Crompton Holdings shareholders have received a total shareholder return of 1.6% over the last year. That's including the dividend. There's no doubt those recent returns are much better than the TSR loss of 3.7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before forming an opinion on Brook Crompton Holdings you might want to consider these 3 valuation metrics.