The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Serba Dinamik Holdings Berhad (KLSE:SERBADK) share price has flown 218% in the last three years. That sort of return is as solid as granite. It’s also good to see the share price up 14% over the last quarter.
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).
Serba Dinamik Holdings Berhad was able to grow its EPS at 39% per year over three years, sending the share price higher. We note that the 47% yearly (average) share price gain isn’t too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn’t changed much over that time. Quite to the contrary, the share price has arguably reflected the EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Serba Dinamik Holdings Berhad has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Serba Dinamik Holdings Berhad stock, you should check out this FREE detailed report on its balance sheet.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Serba Dinamik Holdings Berhad the TSR over the last 3 years was 240%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
Pleasingly, Serba Dinamik Holdings Berhad’s total shareholder return last year was 33%. That’s including the dividend. The TSR has been even better over three years, coming in at 50% per year. 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. For example, we’ve discovered 3 warning signs for Serba Dinamik Holdings Berhad (2 are a bit concerning!) that you should be aware of before investing here.
But note: Serba Dinamik Holdings Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY exchanges.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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