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Investors in CIMB Group Holdings Berhad (KLSE:CIMB) have seen respectable returns of 72% over the past three years

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the CIMB Group Holdings Berhad (KLSE:CIMB) share price is up 50% in the last three years, clearly besting the market decline of around 0.3% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 21% in the last year , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for CIMB Group Holdings Berhad

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.

CIMB Group Holdings Berhad was able to grow its EPS at 50% per year over three years, sending the share price higher. This EPS growth is higher than the 14% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 10.40 also reflects the negative sentiment around the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

We know that CIMB Group Holdings Berhad has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on CIMB Group Holdings Berhad's balance sheet strength 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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CIMB Group Holdings Berhad's TSR for the last 3 years was 72%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that CIMB Group Holdings Berhad has rewarded shareholders with a total shareholder return of 21% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that CIMB Group Holdings Berhad is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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