Should RHB Bank Berhad (KLSE:RHBBANK) Be Disappointed With Their 14% Profit?

We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. For example, the RHB Bank Berhad (KLSE:RHBBANK), share price is up over the last year, but its gain of 14% trails the market return. The longer term returns have not been as good, with the stock price only 3.0% higher than it was three years ago.

Check out our latest analysis for RHB Bank 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 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.

During the last year, RHB Bank Berhad actually saw its earnings per share drop 19%.

So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

RHB Bank Berhad's revenue actually dropped 5.3% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

RHB Bank Berhad is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling RHB Bank Berhad stock, you should check out this free report showing analyst consensus estimates for future profits.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, RHB Bank Berhad's TSR for the last year was 20%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Over the last year RHB Bank Berhad shareholders have received a TSR of 20%. It's always nice to make money but this return falls short of the market return which was about 31% for the year. On the other hand, the TSR over three years was worse, at just 6% per year. This suggests the company's position is improving. If the share price is up as a result of improved business performance, then this kind of improvement may be sustained. It's always interesting to track share price performance over the longer term. But to understand RHB Bank Berhad better, we need to consider many other factors. Take risks, for example - RHB Bank Berhad has 1 warning sign we think you should be aware of.

Of course RHB Bank Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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