Investors in Hong Leong Financial Group Berhad (KLSE:HLFG) have seen returns of 28% over the past five years
When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Hong Leong Financial Group Berhad share price has climbed 11% in five years, easily topping the market return of 3.9% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year, including dividends.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Over half a decade, Hong Leong Financial Group Berhad managed to grow its earnings per share at 11% a year. The EPS growth is more impressive than the yearly share price gain of 2% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.80.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Hong Leong Financial Group Berhad's key metrics by checking this interactive graph of Hong Leong Financial Group Berhad's earnings, revenue and cash flow.
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 spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Hong Leong Financial Group Berhad's TSR for the last 5 years was 28%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Hong Leong Financial Group Berhad shareholders have received a total shareholder return of 12% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Hong Leong Financial Group Berhad you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.