AWC Berhad (KLSE:AWC) shareholders might be concerned after seeing the share price drop 26% in the last quarter. But don't let that distract from the very nice return generated over three years. In the last three years the share price is up, 49%: better than the market.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
See our latest analysis for AWC Berhad
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the last three years, AWC Berhad failed to grow earnings per share, which fell 11% (annualized).
Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Given this situation, it makes sense to look at other metrics too.
The modest 1.2% dividend yield is unlikely to be propping up the share price. It could be that the revenue growth of 5.6% per year is viewed as evidence that AWC Berhad is growing. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that AWC Berhad has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think AWC Berhad will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for AWC Berhad the TSR over the last 3 years was 61%, 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
It's good to see that AWC Berhad has rewarded shareholders with a total shareholder return of 38% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 9% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for AWC Berhad you should be aware of.