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While it may not be enough for some shareholders, we think it is good to see the Malaysia Building Society Berhad (KLSE:MBSB) share price up 13% in a single quarter. But if you look at the last five years the returns have not been good. You would have done a lot better buying an index fund, since the stock has dropped 46% in that 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.
View our latest analysis for Malaysia Building Society Berhad
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the five years over which the share price declined, Malaysia Building Society Berhad's earnings per share (EPS) dropped by 9.2% each year. This reduction in EPS is less than the 12% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.79.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Malaysia Building Society Berhad the TSR over the last 5 years was -22%, 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
It's good to see that Malaysia Building Society Berhad has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 4% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Malaysia Building Society Berhad better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Malaysia Building Society Berhad (of which 1 is a bit unpleasant!) you should know about.