Ideally, your overall portfolio should beat the market average. But even in a market-beating portfolio, some stocks will lag the market. While the Lingkaran Trans Kota Holdings Berhad (KLSE:LITRAK) share price is down 91% over half a decade, the total return to shareholders (which includes dividends) was 26%. And that total return actually beats the market decline of 2.8%. The falls have accelerated recently, with the share price down 90% in the last three 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.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Lingkaran Trans Kota Holdings Berhad

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

While the share price declined over five years, Lingkaran Trans Kota Holdings Berhad actually managed to increase EPS by an average of 0.3% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Looking to other metrics might better explain the share price change.

The steady dividend doesn't really explain why the share price is down. However, revenue has declined at a compound annual rate of 7.2% per year. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We know that Lingkaran Trans Kota Holdings Berhad has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Lingkaran Trans Kota Holdings Berhad

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. In the case of Lingkaran Trans Kota Holdings Berhad, it has a TSR of 26% for the last 5 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 good to see that Lingkaran Trans Kota Holdings Berhad has rewarded shareholders with a total shareholder return of 57% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 5% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with 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. Take risks, for example - Lingkaran Trans Kota Holdings Berhad has 3 warning signs (and 1 which is concerning) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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