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By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Jardine Cycle & Carriage Limited (SGX:C07), which is up 35%, over three years, soundly beating the market return of 4.9% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.6%, including dividends.
Although Jardine Cycle & Carriage has shed S$423m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
See our latest analysis for Jardine Cycle & Carriage
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During three years of share price growth, Jardine Cycle & Carriage achieved compound earnings per share growth of 31% per year. This EPS growth is higher than the 11% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.77.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Jardine Cycle & Carriage's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Jardine Cycle & Carriage's TSR for the last 3 years was 56%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Jardine Cycle & Carriage provided a TSR of 4.6% over the last twelve months. Unfortunately this falls short of the market return. 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. Take risks, for example - Jardine Cycle & Carriage has 1 warning sign we think you should be aware of.