Hong Leong Financial Group Berhad (KLSE:HLFG) Shareholders Have Enjoyed A 26% Share Price Gain

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the Hong Leong Financial Group Berhad (KLSE:HLFG) share price is up 26% in the last 5 years, clearly besting the market decline of around 3.8% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 8.4% , including dividends .

See our latest analysis for Hong Leong Financial Group Berhad

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Hong Leong Financial Group Berhad managed to grow its earnings per share at 2.3% a year. This EPS growth is lower than the 5% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

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

It might be well worthwhile taking a look at our free report on Hong Leong Financial Group Berhad's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Hong Leong Financial Group Berhad the TSR over the last 5 years was 40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Hong Leong Financial Group Berhad shareholders have received returns of 8.4% over twelve months (even including dividends), which isn't far from the general market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 7% per year. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. 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. For instance, we've identified 1 warning sign for Hong Leong Financial Group Berhad that you should be aware of.

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. 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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