Kluang Rubber Company (Malaya) Berhad (KLSE:KLUANG) hikes 12% this week, taking five-year gains to 74%

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Kluang Rubber Company (Malaya) Berhad (KLSE:KLUANG) shareholders have enjoyed a 67% share price rise over the last half decade, well in excess of the market return of around 6.4% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 41% in the last year , including dividends .

The past week has proven to be lucrative for Kluang Rubber Company (Malaya) Berhad investors, so let's see if fundamentals drove the company's five-year performance.

View our latest analysis for Kluang Rubber Company (Malaya) Berhad

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years of share price growth, Kluang Rubber Company (Malaya) Berhad moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Kluang Rubber Company (Malaya) Berhad share price has gained 50% in three years. Meanwhile, EPS is up 23% per year. This EPS growth is higher than the 14% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 11.67.

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

It might be well worthwhile taking a look at our free report on Kluang Rubber Company (Malaya) Berhad's earnings, revenue and cash flow.

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 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. As it happens, Kluang Rubber Company (Malaya) Berhad's TSR for the last 5 years was 74%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Kluang Rubber Company (Malaya) Berhad has rewarded shareholders with a total shareholder return of 41% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Kluang Rubber Company (Malaya) Berhad you should know about.

But note: Kluang Rubber Company (Malaya) Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.