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For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Keppel Infrastructure Trust (SGX:A7RU) shareholders have had that experience, with the share price dropping 22% in three years, versus a market return of about 24%.
With the stock having lost 3.4% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
See our latest analysis for Keppel Infrastructure Trust
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years that the share price fell, Keppel Infrastructure Trust's earnings per share (EPS) dropped by 11% each year. In comparison the 8% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 91.41.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Keppel Infrastructure Trust's key metrics by checking this interactive graph of Keppel Infrastructure Trust's earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Keppel Infrastructure Trust, it has a TSR of 3.4% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Keppel Infrastructure Trust shareholders are down 5.6% for the year (even including dividends), but the market itself is up 25%. 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 8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Keppel Infrastructure Trust better, we need to consider many other factors. For example, we've discovered 4 warning signs for Keppel Infrastructure Trust (3 are concerning!) that you should be aware of before investing here.