Optimism for UWC Berhad (KLSE:UWC) has grown this past week, despite five-year decline in earnings

While UWC Berhad (KLSE:UWC) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 24% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 96% in that time.

Since the stock has added RM254m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We've discovered 2 warning signs about UWC Berhad. View them for free.

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

UWC Berhad's earnings per share are down 15% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on 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.

On the other hand, UWC Berhad's revenue is growing nicely, at a compound rate of 3.3% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

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

We know that UWC Berhad has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between UWC Berhad's total shareholder return (TSR) and its share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. UWC Berhad's TSR of 98% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We regret to report that UWC Berhad shareholders are down 25% for the year. Unfortunately, that's worse than the broader market decline of 3.6%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Even so, be aware that UWC Berhad is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.