Bursa Malaysia Berhad's (KLSE:BURSA) 53% return outpaced the company's earnings growth over the same one-year period

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Bursa Malaysia Berhad (KLSE:BURSA) share price is 47% higher than it was a year ago, much better than the market return of around 21% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 23% higher than it was three years ago.

Since the stock has added RM275m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Bursa Malaysia Berhad

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the last year Bursa Malaysia Berhad grew its earnings per share (EPS) by 26%. The share price gain of 47% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Bursa Malaysia Berhad has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bursa Malaysia Berhad the TSR over the last 1 year was 53%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Bursa Malaysia Berhad has rewarded shareholders with a total shareholder return of 53% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Bursa Malaysia Berhad is showing 2 warning signs in our investment analysis , and 1 of those can't be ignored...

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

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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.

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