Investing in Hong Leong Financial Group Berhad (KLSE:HLFG) a year ago would have delivered you a 14% gain

Diversification is a key tool for dealing with stock price volatility. But the goal is to pick stocks that do better than average. Hong Leong Financial Group Berhad (KLSE:HLFG) has done well over the last year, with the stock price up 10% beating the market return of 10.0% (not including dividends). The longer term returns have not been as good, with the stock price only 4.2% higher than it was three years ago.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Hong Leong Financial Group Berhad

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During the last year Hong Leong Financial Group Berhad grew its earnings per share (EPS) by 12%. This EPS growth is reasonably close to the 10% increase in the share price. This makes us think the market hasn't really changed its sentiment around the company, in the last year. It looks like the share price is responding to the EPS.

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

We know that Hong Leong Financial Group Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Hong Leong Financial Group Berhad, it has a TSR of 14% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Hong Leong Financial Group Berhad provided a TSR of 14% over the year (including dividends). That's fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 4% 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. Keeping this in mind, a solid next step might be to take a look at Hong Leong Financial Group Berhad's dividend track record. This free interactive graph is a great place to start.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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.