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Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Singapore Shipping Corporation Limited (SGX:S19), since the last five years saw the share price fall 18%.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Singapore Shipping
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the five years over which the share price declined, Singapore Shipping's earnings per share (EPS) dropped by 0.8% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 4% per year, over the period. 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 7.90.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Singapore Shipping's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Singapore Shipping the TSR over the last 5 years was -1.8%, 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!
A Different Perspective
Singapore Shipping shareholders are up 2.1% for the year (even including dividends). Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 0.4% per year, over five years. It could well be that the business is stabilizing. 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. Case in point: We've spotted 2 warning signs for Singapore Shipping you should be aware of.