Investors more bullish on FCW Holdings Berhad (KLSE:FCW) this week as stock hikes 16%, despite earnings trending downwards over past five years
Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the FCW Holdings Berhad share price has climbed 98% in five years, easily topping the market decline of 0.8% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 35% in the last year.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
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.
FCW Holdings Berhad's earnings per share are down 1.7% per year, despite strong share price performance over five years.
By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.
The revenue growth of 1.9% per year hardly seems impressive. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on FCW Holdings Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between FCW Holdings Berhad's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that FCW Holdings Berhad's TSR of 102% over the last 5 years is better than the share price return.
A Different Perspective
It's good to see that FCW Holdings Berhad has rewarded shareholders with a total shareholder return of 35% in the last twelve months. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how FCW Holdings Berhad scores on these 3 valuation metrics.
For those who like to find winning investments this free list of undervalued 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.