One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Tencent Music Entertainment Group (NYSE:TME), which is up 74%, over three years, soundly beating the market return of 31% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 29%, including dividends.
Since the stock has added US$791m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Tencent Music Entertainment Group
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 three years of share price growth, Tencent Music Entertainment Group achieved compound earnings per share growth of 20% per year. Notably, the 20% average annual share price gain matches up nicely with the EPS growth rate. That suggests that the market sentiment around the company hasn't changed much over that time. 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).
We know that Tencent Music Entertainment Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Tencent Music Entertainment Group will grow revenue in the future.
A Different Perspective
It's nice to see that Tencent Music Entertainment Group shareholders have received a total shareholder return of 29% over the last year. And that does include the dividend. Notably the five-year annualised TSR loss of 3% 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. Is Tencent Music Entertainment Group cheap compared to other companies? These 3 valuation measures might help you decide.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.