When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Valuetronics Holdings Limited (SGX:BN2) share price is up 69% in the last 5 years, clearly besting the market return of around -8.9% (ignoring dividends).
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Valuetronics Holdings achieved compound earnings per share (EPS) growth of 4.4% per year. This EPS growth is slower than the share price growth of 11% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Valuetronics Holdings's key metrics by checking this interactive graph of Valuetronics Holdings'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 Valuetronics Holdings, it has a TSR of 134% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Valuetronics Holdings shareholders are down 1.1% for the year (even including dividends) , but the market itself is up 2.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 18%, 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. Before forming an opinion on Valuetronics Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.