If you love investing in stocks you're bound to buy some losers. But long term Gadang Holdings Berhad (KLSE:GADANG) shareholders have had a particularly rough ride in the last three year. Sadly for them, the share price is down 63% in that time. The more recent news is of little comfort, with the share price down 34% in a year.
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 three years that the share price fell, Gadang Holdings Berhad's earnings per share (EPS) dropped by 52% each year. In comparison the 28% compound annual share price decline isn't as bad as the EPS drop-off. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Gadang Holdings Berhad, it has a TSR of -59% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Gadang Holdings Berhad shareholders are down 32% for the year (even including dividends), but the market itself is up 8.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 4 warning signs for Gadang Holdings Berhad you should be aware of, and 1 of them is concerning.
Of course Gadang Holdings 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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Gadang Holdings Berhad
Gadang Holdings Berhad, an investment holding company, engages in civil engineering and construction, property development, water supply, and mechanical and electrical engineering businesses in Malaysia, Indonesia, and Singapore.
Flawless balance sheet with reasonable growth potential.