By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Hong Leong Industries Berhad (KLSE:HLIND), which is up 18%, over three years, soundly beating the market return of 0.3% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 5.3% , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Hong Leong Industries Berhad
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.
Hong Leong Industries Berhad was able to grow its EPS at 17% per year over three years, sending the share price higher. The average annual share price increase of 6% 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 9.64.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Hong Leong Industries Berhad has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hong Leong Industries Berhad the TSR over the last 3 years was 41%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Hong Leong Industries Berhad shareholders gained a total return of 5.3% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 1.9% per year over five year. This suggests the company might be improving over time. 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. Case in point: We've spotted 1 warning sign for Hong Leong Industries Berhad you should be aware of.