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Micro-Mechanics (Holdings) Ltd. (SGX:5DD) shareholders should be happy to see the share price up 11% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 47% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
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.
Check out our latest analysis for Micro-Mechanics (Holdings)
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
Micro-Mechanics (Holdings) saw its EPS decline at a compound rate of 24% per year, over the last three years. In comparison the 19% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Micro-Mechanics (Holdings)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Micro-Mechanics (Holdings)'s TSR for the last 3 years was -39%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Micro-Mechanics (Holdings) shareholders are down 3.9% for the year (even including dividends), but the market itself is up 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 2 warning signs for Micro-Mechanics (Holdings) (1 doesn't sit too well with us!) that you should be aware of before investing here.