The five-year decline in earnings for AFFIN Bank Berhad KLSE:AFFIN) isn't encouraging, but shareholders are still up 120% over that period

When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the AFFIN Bank Berhad share price has climbed 66% in five years, easily topping the market return of 2.1% (ignoring dividends).

Although AFFIN Bank Berhad has shed RM329m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, AFFIN Bank Berhad actually saw its EPS drop 1.8% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

In contrast revenue growth of 4.9% per year is probably viewed as evidence that AFFIN Bank Berhad is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

We know that AFFIN Bank Berhad has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About The Total Shareholder Return (TSR)?

Investors should note that there's a difference between AFFIN Bank Berhad's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. AFFIN Bank Berhad's TSR of 120% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We regret to report that AFFIN Bank Berhad shareholders are down 11% for the year. Unfortunately, that's worse than the broader market decline of 7.0%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is AFFIN Bank Berhad cheap compared to other companies? These 3 valuation measures might help you decide.

But note: AFFIN Bank Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.