The main goal of stock picking is to find stocks that beat the market. But the main game is to find enough winners to more than offset the losers At this point, some shareholders may question their investment in Sing Holdings Limited (SGX: 5IC), since the last five years have seen the share price fall by 24%. On the other hand, the stock price has rebounded 5.6% over the past week. Market momentum could have helped push up the stock price, as shares rose 2.3% over the same period.
Given that shareholders are down longer term, let’s take a look at the underlying fundamentals over this period and see if they have been consistent with returns.
To quote Buffett, “Ships will circumnavigate the globe, but the Flat Earth Society will prosper. There will continue to be wide gaps between price and value in the market…’ An imperfect but reasonable way to gauge how sentiment around a company has changed is to compare earnings per share (EPS) with the stock price.
While the stock price has fallen in five years, Sing Holdings has actually managed to increase EPS of 8.9% on average per year. Given the stock price reaction, one might suspect that EPS is not a good indicator of the company’s performance over the period (perhaps due to a loss or a one-time gain). Alternatively, growth expectations may have been unreasonable in the past.
Due to the lack of correlation between EPS growth and share price decline, it is worth looking at other metrics to try to understand stock price movement.
Revenues actually grew 16% over the period. So it looks like we need to take a closer look at the fundamentals to understand why the stock price is languishing. After all, there may be an opportunity.
You can see how earnings and income have changed over time below (find out the exact values by clicking on the image).
This free interactive report on Sing Holdings’ 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 stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. In the case of Sing Holdings, it has a TSR of -11% over the last 5 years. This exceeds the performance of its share price that we mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.
A different perspective
While it hurts that Sing Holdings posted a 1.3% loss over the past twelve months, the broader market was actually worse, posting a 3.7% loss. What is more shocking is the 2% per year loss that investors have suffered over the past half-decade. As losses slow, we doubt many shareholders will be happy with the stock. It is always interesting to follow the evolution of the share price over the long term. But to better understand Sing Holdings, we need to consider many other factors. Take for example the ubiquitous specter of investment risk. We have identified 2 warning signs with Sing Holdings and understanding them should be part of your investment process.
If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of the stocks currently trading on the SG Exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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