In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn’t blame long term Lippo Malls Indonesia Retail Trust (SGX:D5IU) shareholders for doubting their decision to hold, with the stock down 42% over a half decade.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the five years over which the share price declined, Lippo Malls Indonesia Retail Trust’s earnings per share (EPS) dropped by 12% each year. This change in EPS is reasonably close to the 10% average annual decrease in the share price. That suggests that the market sentiment around the company hasn’t changed much over that time. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time.
This free interactive report on Lippo Malls Indonesia Retail Trust’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Lippo Malls Indonesia Retail Trust, it has a TSR of -10% for the last 5 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 1.5% in the last year, Lippo Malls Indonesia Retail Trust shareholders lost 7.0% (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, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2.1% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Keeping this in mind, a solid next step might be to take a look at Lippo Malls Indonesia Retail Trust’s dividend track record. This free interactive graph is a great place to start.
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 SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.