We think that it's fair to say that the possibility of finding fantastic multi-year winners is what motivates many investors. You won't get it right every time, but when you do, the returns can be truly splendid. Take, for example, the PGF Capital Berhad (KLSE:PGF) share price, which skyrocketed 312% over three years. On top of that, the share price is up 32% in about a quarter. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for PGF Capital Berhad
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
During three years of share price growth, PGF Capital Berhad achieved compound earnings per share growth of 70% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 60% average annual increase in the share price. This observation indicates that the market's attitude to the business hasn't changed all that much. Au contraire, the share price change has arguably mimicked the EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on PGF Capital Berhad's earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, PGF Capital Berhad's TSR for the last 3 years was 322%, 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 PGF Capital Berhad shareholders have received a total shareholder return of 102% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 21% per year), it would seem that the stock's performance has improved in recent times. 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. For instance, we've identified 3 warning signs for PGF Capital Berhad (1 makes us a bit uncomfortable) that you should be aware of.