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When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Sing Investments & Finance Limited (SGX:S35) share price is up 13% in the last 5 years, clearly besting the market decline of around 12% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 13% in the last year, 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.
See our latest analysis for Sing Investments & Finance
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Sing Investments & Finance managed to grow its earnings per share at 8.5% a year. The EPS growth is more impressive than the yearly share price gain of 2% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 7.55 also suggests market apprehension.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Sing Investments & Finance's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Sing Investments & Finance, it has a TSR of 44% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Sing Investments & Finance shareholders gained a total return of 13% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This suggests the company might be improving over time. 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. Even so, be aware that Sing Investments & Finance is showing 1 warning sign in our investment analysis , you should know about...