Investors five-year losses continue as Gadang Holdings Berhad (KLSE:GADANG) dips a further 11% this week, earnings continue to decline

By
Simply Wall St
Published
May 13, 2022
KLSE:GADANG
Source: Shutterstock

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example the Gadang Holdings Berhad (KLSE:GADANG) share price dropped 71% over five years. We certainly feel for shareholders who bought near the top. Even worse, it's down 12% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for Gadang 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 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 five years over which the share price declined, Gadang Holdings Berhad's earnings per share (EPS) dropped by 15% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 22% per year, over the period. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 5.17.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
KLSE:GADANG Earnings Per Share Growth May 13th 2022

We know that Gadang Holdings Berhad has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Gadang Holdings Berhad will grow revenue in the future.

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. 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 -67% for the last 5 years. 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

Investors in Gadang Holdings Berhad had a tough year, with a total loss of 5.4% (including dividends), against a market gain of about 0.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Gadang Holdings Berhad better, we need to consider many other factors. For example, we've discovered 2 warning signs for Gadang Holdings Berhad (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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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