Passive investing in index funds can generate returns that roughly match the overall market. But investors can boost returns by picking market-beating companies to own shares in. For example, the Ecomate Holdings Berhad (KLSE:ECOMATE) share price is up 30% in the last 1 year, clearly besting the market decline of around 5.2% (not including dividends). That's a solid performance by our standards! Ecomate Holdings Berhad hasn't been listed for long, so it's still not clear if it is a long term winner.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Ecomate Holdings 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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last twelve months, Ecomate Holdings Berhad actually shrank its EPS by 18%.
Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We are skeptical of the suggestion that the 0.7% dividend yield would entice buyers to the stock. Ecomate Holdings Berhad's revenue actually dropped 13% over last year. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling Ecomate Holdings Berhad stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Ecomate Holdings Berhad boasts a total shareholder return of 31% for the last year (that includes the dividends) . We regret to report that the share price is down 2.8% over ninety days. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. It's always interesting to track share price performance over the longer term. But to understand Ecomate Holdings Berhad better, we need to consider many other factors. For instance, we've identified 2 warning signs for Ecomate Holdings Berhad that you should be aware of.