Should Zhulian Corporation Berhad (KLSE:ZHULIAN) Be Disappointed With Their 12% Profit?

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Zhulian Corporation Berhad (KLSE:ZHULIAN) share price is up 12% in the last year, clearly besting the market return of around 5.6% (not including dividends). So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 7.9% in three years.

Check out our latest analysis for Zhulian Corporation 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 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, Zhulian Corporation Berhad actually saw its earnings per share drop 25%.

Given the share price gain, we doubt the market is measuring progress with EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

Absent any improvement, we don't think a thirst for dividends is pushing up the Zhulian Corporation Berhad's share price. It saw it's revenue decline by 5.8% over twelve months. It's fair to say we're a little surprised to see the share price up, and that makes us cautious.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Zhulian Corporation Berhad's TSR for the last year was 24%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Zhulian Corporation Berhad shareholders have received a total shareholder return of 24% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Zhulian Corporation Berhad better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Zhulian Corporation Berhad you should be aware of.

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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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