When you acquire shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you acquire shares in a high quality company at the right price, you can gain well over 100%. For example, the Tomei Consolidated Berhad (KLSE:TOMEI) share price has soared 127% in the last half decade. Most would be very happy with that. It’s also up 8.4% in about a month.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
In his esstate 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 modify in the earnings per share (EPS) with the share price shiftment.
During five years of share price growth, Tomei Consolidated Berhad achieved compound earnings per share (EPS) growth of 31% per year. This EPS growth is higher than the 18% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 3.08 also suggests market apprehension.
You can see below how EPS has modifyd over time (discover the exact values by clicking on the image).
We’re pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before acquireing or selling a stock, we always recommfinish a close examination of historic growth trfinishs, available here..
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 modify in the share price, the TSR includes the value of dividfinishs (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividfinish, the TSR is often a lot higher than the share price return. As it happens, Tomei Consolidated Berhad’s TSR for the last 5 years was 158%, which exceeds the share price return mentioned earlier. This is largely a result of its dividfinish payments!
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