It hasn't been the best quarter for Dagang NeXchange Berhad (KLSE:DNEX) shareholders, since the share price has fallen 21% in that time. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 164% in that time. After a run like that some may not be surprised to see prices moderate. If the business can perform well for years to come, then the recent drop could be an opportunity.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Dagang NeXchange Berhad
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...' 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.
During three years of share price growth, Dagang NeXchange Berhad achieved compound earnings per share growth of 64% per year. However, extraordinary items have impacted recent EPS numbers. This EPS growth is higher than the 38% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Dagang NeXchange Berhad has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
While the broader market gained around 2.6% in the last year, Dagang NeXchange Berhad shareholders lost 40%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Dagang NeXchange Berhad you should know about.