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Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Bursa Malaysia Berhad (KLSE:BURSA) shareholders have had that experience, with the share price dropping 21% in three years, versus a market decline of about 12%.
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.
See our latest analysis for Bursa Malaysia Berhad
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Although the share price is down over three years, Bursa Malaysia Berhad actually managed to grow EPS by 1.7% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. Looking to other metrics might better explain the share price change.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Bursa Malaysia Berhad is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Bursa Malaysia Berhad stock, you should check out this free report showing analyst consensus estimates for future profits.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bursa Malaysia Berhad the TSR over the last 3 years was -8.1%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!