In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that’s been the case for longer term Q & M Dental Group (Singapore) Limited (SGX:QC7) shareholders, since the share price is down 34% in the last three years, falling well short of the market return of around 22%. And over the last year the share price fell 30%, so we doubt many shareholders are delighted. Unhappily, the share price slid 5.3% in the last week.
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.
Although the share price is down over three years, Q & M Dental Group (Singapore) actually managed to grow EPS by 7.5% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
The modest 1.8% dividend yield is unlikely to be guiding the market view of the stock. We think that the revenue decline over three years, at a rate of 4.9% per year, probably had some shareholders looking to sell. And that’s not surprising, since it seems unlikely that EPS growth can continue for long in the absence of revenue growth.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
If you are thinking of buying or selling Q & M Dental Group (Singapore) stock, you should check out this FREE detailed report on its balance sheet.
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 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. As it happens, Q & M Dental Group (Singapore)’s TSR for the last 3 years was -30%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that Q & M Dental Group (Singapore) shareholders are down 28% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 5.5%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 6.9% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Q & M Dental Group (Singapore) it might be wise to click here to see if insiders have been buying or selling shares.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.