Sungei Bagan Rubber Company (Malaya) Berhad (KLSE:SBAGAN) delivers shareholders stellar 16% CAGR over 5 years, surging 15% in the last week alone

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Sungei Bagan Rubber Company (Malaya) Berhad share price has climbed 92% in five years, easily topping the market return of 6.6% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 77% in the last year , including dividends .

Since the stock has added RM49m 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 Sungei Bagan Rubber Company (Malaya) 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 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 half decade, Sungei Bagan Rubber Company (Malaya) Berhad became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Sungei Bagan Rubber Company (Malaya) Berhad share price is up 75% in the last three years. During the same period, EPS grew by 17% each year. This EPS growth is reasonably close to the 21% average annual increase in the share price (over three years, again). That suggests that the market sentiment around the company hasn't changed much over that time. There's a strong correlation between the share price and EPS.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Sungei Bagan Rubber Company (Malaya) Berhad's key metrics by checking this interactive graph of Sungei Bagan 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Sungei Bagan Rubber Company (Malaya) Berhad, it has a TSR of 107% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Sungei Bagan Rubber Company (Malaya) Berhad shareholders have received a total shareholder return of 77% over the last year. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. 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. Take risks, for example - Sungei Bagan Rubber Company (Malaya) Berhad has 1 warning sign we think 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 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.