Stock Analysis

A Look At 7-Eleven Malaysia Holdings Berhad's (KLSE:SEM) Share Price Returns

KLSE:SEM
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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) shareholders, since the share price is down 12% in the last three years, falling well short of the market decline of around 5.1%. It's down 1.5% in the last seven days.

Check out our latest analysis for 7-Eleven Malaysia Holdings Berhad

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the three years that the share price fell, 7-Eleven Malaysia Holdings Berhad's earnings per share (EPS) dropped by 6.7% each year. In comparison the 4% 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).

earnings-per-share-growth
KLSE:SEM Earnings Per Share Growth January 22nd 2021

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on 7-Eleven Malaysia Holdings Berhad's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of 7-Eleven Malaysia Holdings Berhad, it has a TSR of -7.2% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

7-Eleven Malaysia Holdings Berhad shareholders are down 1.9% for the year (even including dividends), but the market itself is up 6.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 0.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with 7-Eleven Malaysia Holdings Berhad (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

Of course 7-Eleven Malaysia 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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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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