If You Had Bought Far East Holdings Berhad (KLSE:FAREAST) Stock Five Years Ago, You Could Pocket A 49% Gain Today

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Far East Holdings Berhad (KLSE:FAREAST) share price is up 49% in the last 5 years, clearly besting the market decline of around 7.5% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 6.0% in the last year , including dividends .

Check out our latest analysis for Far East 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...' 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 five years of share price growth, Far East Holdings Berhad achieved compound earnings per share (EPS) growth of 10% per year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

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

This free interactive report on Far East 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?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Far East Holdings Berhad, it has a TSR of 69% 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

Far East Holdings Berhad provided a TSR of 6.0% over the last twelve months. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 11% per year for five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Far East Holdings Berhad better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Far East Holdings Berhad (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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