The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term LPI Capital Bhd (KLSE:LPI) shareholders for doubting their decision to hold, with the stock down 26% over a half decade.
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.
Check out our latest analysis for LPI Capital Bhd
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.
Looking back five years, both LPI Capital Bhd's share price and EPS declined; the latter at a rate of 2.0% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 6% per year, over the period. This implies that the market is more cautious about the business these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into LPI Capital Bhd's key metrics by checking this interactive graph of LPI Capital Bhd's earnings, revenue and cash flow.
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. As it happens, LPI Capital Bhd's TSR for the last 5 years was -5.7%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that LPI Capital Bhd shareholders are down 8.4% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.7%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.1% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for LPI Capital Bhd that you should be aware of before investing here.