For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Bumitama Agri Ltd. (SGX:P8Z) shareholders for doubting their decision to hold, with the stock down 53% over a half decade. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both Bumitama Agri's share price and EPS declined; the latter at a rate of 0.6% per year. This reduction in EPS is less than the 14% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 10.75.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Bumitama Agri's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Bumitama Agri the TSR over the last 5 years was -47%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 2.2% in the last year, Bumitama Agri shareholders lost 13% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Before forming an opinion on Bumitama Agri you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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 firstname.lastname@example.org. 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.