Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. For example, the Frontken Corporation Berhad (KLSE:FRONTKN) share price is up a whopping 521% in the last half decade, a handsome return for long term holders. This just goes to show the value creation that some businesses can achieve. It really delights us to see such great share price performance for investors.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Frontken Corporation Berhad
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 five years of share price growth, Frontken Corporation Berhad achieved compound earnings per share (EPS) growth of 21% per year. This EPS growth is lower than the 44% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Frontken Corporation Berhad the TSR over the last 5 years was 560%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Frontken Corporation Berhad shareholders are up 3.1% for the year (even including dividends). But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 46% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Is Frontken Corporation Berhad cheap compared to other companies? These 3 valuation measures might help you decide.