The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the Homeritz Corporation Berhad (KLSE:HOMERIZ) share price is up 21% in the last 1 year, clearly besting the market return of around 13% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren't so impressive, with stock gaining just 2.6% in three years.
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 Homeritz Corporation 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...' 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 the last year Homeritz Corporation Berhad grew its earnings per share (EPS) by 21%. The similarity between the EPS growth and the 21% share price gain really stands out. So this implies that investor expectations of the company have remained pretty steady. It looks like the share price is responding to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Homeritz Corporation Berhad's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 Homeritz Corporation Berhad the TSR over the last 1 year was 25%, 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!