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One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, KPJ Healthcare Berhad (KLSE:KPJ) shareholders have seen the share price rise 38% over three years, well in excess of the market decline (5.0%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 34% in the last year , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for KPJ Healthcare Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Over the last three years, KPJ Healthcare Berhad failed to grow earnings per share, which fell 2.2% (annualized).
Based on these numbers, we think that the decline in earnings per share may not be a good representation of how the business has changed over the years. So other metrics may hold the key to understanding what is influencing investors.
It may well be that KPJ Healthcare Berhad revenue growth rate of 11% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
KPJ Healthcare Berhad is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling KPJ Healthcare Berhad stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, KPJ Healthcare Berhad's TSR for the last 3 years was 44%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.