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These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Jardine Matheson Holdings Limited (SGX:J36) share price is 17% higher than it was a year ago, much better than the market return of around 13% (not including dividends) in the same period. That's a solid performance by our standards! Zooming out, the stock is actually down 16% in the last three years.
Since the stock has added US$974m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Our free stock report includes 1 warning sign investors should be aware of before investing in Jardine Matheson Holdings. Read for free now.
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.
Over the last twelve months Jardine Matheson Holdings went from profitable to unprofitable. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
We haven't seen Jardine Matheson Holdings increase dividend payments yet, so the yield probably hasn't helped drive the share higher. And at a glance the languishing revenue does not impress, though a closer look might help explain the market optimism.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Jardine Matheson Holdings
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. In the case of Jardine Matheson Holdings, it has a TSR of 23% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!