We think intelligent long term investing is the way to go. But unfortunately, some companies simply don’t succeed. For example, after five long years the Overseas Education Limited (SGX:RQ1) share price is a whole 68% lower. That’s an unpleasant experience for long term holders.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Looking back five years, both Overseas Education’s share price and EPS declined; the latter at a rate of 21% per year. This change in EPS is remarkably close to the 20% 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.
You can see below how EPS has changed over time.
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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, Overseas Education’s TSR for the last 5 years was -55%, 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 Overseas Education shareholders have received a total shareholder return of 7.4% over one year. That’s including the dividend. There’s no doubt those recent returns are much better than the TSR loss of 15% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Keeping this in mind, a solid next step might be to take a look at Overseas Education’s dividend track record. This free interactive graph is a great place to start.
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 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.