Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Hexza Corporation Berhad (KLSE:HEXZA) shareholders have enjoyed a 50% share price rise over the last half decade, well in excess of the market return of around 7.7% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 24%, including dividends.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

Check out our latest analysis for Hexza Corporation 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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Hexza Corporation Berhad actually saw its EPS drop 2.1% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that the dividend has not increased, so that doesn't seem to explain the increase, either. And the revenue decline of -12% per year could be viewed as evidence that Hexza Corporation Berhad is shrinking. So this one is a tough nut to crack, and we'd be cautious of the stock. However, further research might explain the share price gain.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Hexza Corporation Berhad, it has a TSR of 100% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!