Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the Oriental Food Industries Holdings Berhad (KLSE:OFI) share price managed to fall 64% over five long years. That is extremely sub-optimal, to say the least. But it's up 9.4% in the last week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Looking back five years, both Oriental Food Industries Holdings Berhad's share price and EPS declined; the latter at a rate of 15% per year. This reduction in EPS is less than the 19% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Oriental Food Industries 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. 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 Oriental Food Industries Holdings Berhad the TSR over the last 5 years was -60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Oriental Food Industries Holdings Berhad shareholders have received returns of 14% over twelve months (even including dividends), which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 10%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for Oriental Food Industries Holdings Berhad. 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. For instance, we've identified 3 warning signs for Oriental Food Industries Holdings Berhad (1 makes us a bit uncomfortable) that you should be aware of.
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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