Stock Analysis

Does Malita Investments' (MTSE:MLT) Share Price Gain of 27% Match Its Business Performance?

MTSE:MLT
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By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. Just take a look at Malita Investments p.l.c. (MTSE:MLT), which is up 27%, over three years, soundly beating the market decline of 6.0% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 9.2% , including dividends .

View our latest analysis for Malita Investments

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Malita Investments was able to grow its EPS at 15% per year over three years, sending the share price higher. We note, however, that extraordinary items have impacted earnings. This EPS growth is higher than the 8% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
MTSE:MLT Earnings Per Share Growth December 16th 2020

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Malita Investments the TSR over the last 3 years was 40%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Malita Investments has rewarded shareholders with a total shareholder return of 9.2% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 2% 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Malita Investments that you should be aware of before investing here.

We will like Malita Investments better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MT exchanges.

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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. 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.
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