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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term Sarine Technologies Ltd. (SGX:U77) shareholders for doubting their decision to hold, with the stock down 61% over a half decade. And some of the more recent buyers are probably worried, too, with the stock falling 46% in the last year. On the other hand the share price has bounced 5.6% over the last week. The buoyant market could have helped drive the share price pop, since stocks are up 2.3% in the same period.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Sarine Technologies
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Sarine Technologies moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of around 3.0% would not have helped the stock price. So it seems weak revenue and dividend trends may have influenced the share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Sarine Technologies has grown profits over the years, but the future is more important for shareholders. This free interactive report on Sarine Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Sarine Technologies, it has a TSR of -49% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!