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By buying an index fund, you can roughly match the market return with ease. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Karin Technology Holdings Limited (SGX:K29) shareholders have seen the share price rise 13% over three years, well in excess of the market decline (7.4%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 6.0%, including dividends.
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 Karin Technology Holdings
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During three years of share price growth, Karin Technology Holdings achieved compound earnings per share growth of 104% per year. The average annual share price increase of 4% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 8.47 also reflects the negative sentiment around the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Karin Technology Holdings' key metrics by checking this interactive graph of Karin Technology Holdings'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). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Karin Technology Holdings' TSR for the last 3 years was 56%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Karin Technology Holdings has rewarded shareholders with a total shareholder return of 6.0% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 10% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Karin Technology Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Karin Technology Holdings (at least 1 which is significant) , and understanding them should be part of your investment process.