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One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Hock Lian Seng Holdings Limited (SGX:J2T) share price is up 52% in the last three years, clearly besting the market return of around 0.9% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 44% in the last year, including dividends.
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.
Check out our latest analysis for Hock Lian Seng Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, Hock Lian Seng Holdings achieved compound earnings per share growth of 53% per year. The average annual share price increase of 15% 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 4.71.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Hock Lian Seng Holdings' key metrics by checking this interactive graph of Hock Lian Seng Holdings's earnings, revenue and cash flow.
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. In the case of Hock Lian Seng Holdings, it has a TSR of 74% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Hock Lian Seng Holdings shareholders have received a total shareholder return of 44% over the last year. That's including the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Hock Lian Seng Holdings better, we need to consider many other factors. Even so, be aware that Hock Lian Seng Holdings is showing 1 warning sign in our investment analysis , you should know about...