Generally speaking long term investing is the way to go. But no-one is immune from buying too high. Zooming in on an example, the JAKS Resources Berhad (KLSE:JAKS) share price dropped 83% in the last half decade. That is extremely sub-optimal, to say the least. And we doubt long term believers are the only worried holders, since the stock price has declined 43% over the last twelve months. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.
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.
See our latest analysis for JAKS Resources Berhad
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, JAKS Resources Berhad moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 27% per year is viewed as evidence that JAKS Resources Berhad is shrinking. This has probably encouraged some shareholders to sell down the stock.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that JAKS Resources Berhad has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think JAKS Resources Berhad will earn in the future (free profit forecasts).
What About The Total Shareholder Return (TSR)?
We've already covered JAKS Resources Berhad's share price action, but we should also mention its total shareholder return (TSR). 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. We note that JAKS Resources Berhad's TSR, at -68% is higher than its share price return of -83%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.