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Imagine Owning QAF (SGX:Q01) And Wondering If The 44% Share Price Slide Is Justified

Simply Wall St

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term QAF Limited (SGX:Q01) shareholders, since the share price is down 44% in the last three years, falling well short of the market return of around 17%. It's down 1.9% in the last seven days.

Check out our latest analysis for QAF

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).

QAF saw its EPS decline at a compound rate of 52% per year, over the last three years. This fall in the EPS is worse than the 18% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 49.48.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

SGX:Q01 Past and Future Earnings, January 16th 2020

Dive deeper into QAF's key metrics by checking this interactive graph of QAF'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of QAF, it has a TSR of -35% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that QAF shareholders have received a total shareholder return of 26% over the last year. Of course, that includes the dividend. That's better than the annualised return of 0.8% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand QAF better, we need to consider many other factors. For instance, we've identified 2 warning signs for QAF (1 is significant) that you should be aware of.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.