SD Guthrie Berhad (KLSE:SDG) shareholders have earned a 11% CAGR over the last three years

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, the SD Guthrie Berhad (KLSE:SDG) share price is up 22% in the last three years, clearly besting the market return of around 9.3% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 7.4%, including dividends.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for SD Guthrie Berhad

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

SD Guthrie Berhad was able to grow its EPS at 16% per year over three years, sending the share price higher. The average annual share price increase of 7% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for SD Guthrie Berhad the TSR over the last 3 years was 37%, 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

SD Guthrie Berhad shareholders are up 7.4% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with SD Guthrie Berhad (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Of course SD Guthrie Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.