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For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term SUTL Enterprise Limited (SGX:BHU) shareholders, since the share price is down 14% in the last three years, falling well short of the market return of around 16%.
See our latest analysis for SUTL Enterprise
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 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).
Although the share price is down over three years, SUTL Enterprise actually managed to grow EPS by 18% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
It is a little bizarre to see the share price down, despite a strong improvement to earnings per share. So we'll have to take a look at other metrics to try to understand the price action.
We note that, in three years, revenue has actually grown at a 9.0% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching SUTL Enterprise more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of SUTL Enterprise, it has a TSR of -6.5% 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
Over the last year, SUTL Enterprise shareholders took a loss of 6.4% , including dividends . In contrast the market gained about 6.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 2.2% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Importantly, we haven't analysed SUTL Enterprise's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.