While shareholders of UMW Holdings Berhad (KLSE:UMW) are in the red over the last five years, underlying earnings have actually grown

While it may not be enough for some shareholders, we think it is good to see the UMW Holdings Berhad (KLSE:UMW) share price up 13% in a single quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 44% in that time, significantly under-performing the market.

On a more encouraging note the company has added RM386m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

See our latest analysis for UMW Holdings Berhad

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).

While the share price declined over five years, UMW Holdings Berhad actually managed to increase EPS by an average of 6.5% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

We don't think that the 1.7% is big factor in the share price, since it's quite small, as dividends go. The revenue decline of 1.0% isn't too bad. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think UMW Holdings Berhad will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 UMW Holdings Berhad, it has a TSR of -36% 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

It's nice to see that UMW Holdings Berhad shareholders have received a total shareholder return of 3.3% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 6% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before deciding if you like the current share price, check how UMW Holdings Berhad scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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