We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. For example, we sympathize with anyone who was caught holding UEM Edgenta Berhad (KLSE:EDGENTA) during the five years that saw its share price drop a whopping 80%. And we doubt long term believers are the only worried holders, since the stock price has declined 38% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 24% in the last 90 days.
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.
See our latest analysis for UEM Edgenta Berhad
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the five years over which the share price declined, UEM Edgenta Berhad's earnings per share (EPS) dropped by 28% each year. In this case, the EPS change is really very close to the share price drop of 27% a year. That suggests that the market sentiment around the company hasn't changed much over that time. So it's fair to say the share price has been responding to changes in EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on UEM Edgenta Berhad's earnings, revenue and cash flow.
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 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, UEM Edgenta Berhad's TSR for the last 5 years was -77%, 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
While the broader market gained around 17% in the last year, UEM Edgenta Berhad shareholders lost 36% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 - UEM Edgenta Berhad has 2 warning signs we think you should be aware of.