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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Singapore Airlines Limited (SGX:C6L) shareholders for doubting their decision to hold, with the stock down 31% over a half decade.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Singapore Airlines
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Singapore Airlines 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.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Singapore Airlines is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Singapore Airlines the TSR over the last 5 years was 14%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Singapore Airlines provided a TSR of 7.8% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Case in point: We've spotted 2 warning signs for Singapore Airlines you should be aware of, and 1 of them is a bit unpleasant.