These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. A talented investor can beat the market with a diversified portfolio, but even then, some stocks will under-perform. While the Malayan Banking Berhad (KLSE:MAYBANK) share price is down 10% over half a decade, the total return to shareholders (which includes dividends) was 25%. And that total return actually beats the market decline of 2.9%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Malayan Banking Berhad
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the five years over which the share price declined, Malayan Banking Berhad's earnings per share (EPS) dropped by 2.2% each year. This change in EPS is remarkably close to the 2% average annual decrease in the share price. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. We note that for Malayan Banking Berhad the TSR over the last 5 years was 25%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Malayan Banking Berhad shareholders have received a total shareholder return of 14% over one year. Of course, that includes the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Malayan Banking Berhad (at least 1 which is potentially serious) , and understanding them should be part of your investment process.