Stock Analysis

If You Had Bought CIMB Group Holdings Berhad's (KLSE:CIMB) Shares Three Years Ago You Would Be Down 40%

KLSE:CIMB
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CIMB Group Holdings Berhad (KLSE:CIMB) shareholders should be happy to see the share price up 19% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 40% in the last three years, significantly under-performing the market.

Check out our latest analysis for CIMB Group Holdings Berhad

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

CIMB Group Holdings Berhad saw its EPS decline at a compound rate of 38% per year, over the last three years. This fall in the EPS is worse than the 16% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
KLSE:CIMB Earnings Per Share Growth March 1st 2021

Dive deeper into CIMB Group Holdings Berhad's key metrics by checking this interactive graph of CIMB Group Holdings Berhad's earnings, revenue and cash flow.

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 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 CIMB Group Holdings Berhad the TSR over the last 3 years was -33%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

CIMB Group Holdings Berhad shareholders are down 7.4% for the year (even including dividends), but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - CIMB Group Holdings Berhad has 1 warning sign we think you should be aware of.

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 MY 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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