Shareholders in Elsoft Research Berhad (KLSE:ELSOFT) are in the red if they invested five years ago
Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Elsoft Research Berhad (KLSE:ELSOFT), since the last five years saw the share price fall 48%.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Elsoft Research Berhad
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Looking back five years, both Elsoft Research Berhad’s share price and EPS declined; the latter at a rate of 29% per year. This fall in the EPS is worse than the 12% compound annual share price fall. So investors might expect EPS to bounce back — or they may have previously foreseen the EPS decline. The high P/E ratio of 49.64 suggests that shareholders believe earnings will grow in the years ahead.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Elsoft Research Berhad has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Elsoft Research Berhad’s financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Elsoft Research Berhad the TSR over the last 5 years was -40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 12% in the last year, Elsoft Research Berhad shareholders lost 3.5% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 7% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It’s always interesting to track share price performance over the longer term. But to understand Elsoft Research Berhad better, we need to consider many other factors. For instance, we’ve identified 5 warning signs for Elsoft Research Berhad that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
