Telekom Malaysia Berhad's (KLSE:TM) investors will be pleased with their impressive 122% return over the last five years
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Telekom Malaysia Berhad (KLSE:TM) shareholders have enjoyed a 91% share price rise over the last half decade, well in excess of the market return of around 0.1% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 26% , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Telekom Malaysia Berhad
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
During five years of share price growth, Telekom Malaysia Berhad achieved compound earnings per share (EPS) growth of 64% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Telekom Malaysia Berhad has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Telekom Malaysia Berhad, it has a TSR of 122% 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
It's good to see that Telekom Malaysia Berhad has rewarded shareholders with a total shareholder return of 26% in the last twelve months. And that does include the dividend. That's better than the annualised return of 17% over half a decade, implying that the company is doing better recently. 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. For instance, we've identified 2 warning signs for Telekom Malaysia Berhad (1 makes us a bit uncomfortable) 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 Malaysian exchanges.
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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.
