The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Petron Malaysia Refining & Marketing Bhd (KLSE:PETRONM) shareholders for doubting their decision to hold, with the stock down 41% over a half decade.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Petron Malaysia Refining & Marketing Bhd
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, Petron Malaysia Refining & Marketing Bhd's earnings per share (EPS) dropped by 3.9% each year. This reduction in EPS is less than the 10% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 4.12.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Petron Malaysia Refining & Marketing Bhd has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Petron Malaysia Refining & Marketing Bhd's TSR for the last 5 years was -31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Petron Malaysia Refining & Marketing Bhd shareholders have received a total shareholder return of 11% over the last year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Petron Malaysia Refining & Marketing Bhd (of which 1 doesn't sit too well with us!) you should know about.