Optimism for TDM Berhad (KLSE:TDM) has grown this past week, despite one-year decline in earnings

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the TDM Berhad (KLSE:TDM) share price is 68% higher than it was a year ago, much better than the market return of around 12% (not including dividends) in the same period. So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 1.8% higher than it was three years ago.

Since the stock has added RM52m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for TDM Berhad

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

TDM Berhad went from making a loss to reporting a profit, in the last year.

When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.

We doubt the modest 0.6% dividend yield is doing much to support the share price. TDM Berhad's revenue actually dropped 3.3% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

If you are thinking of buying or selling TDM Berhad stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

We're pleased to report that TDM Berhad shareholders have received a total shareholder return of 69% over one year. Of course, that includes 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. It's always interesting to track share price performance over the longer term. But to understand TDM Berhad better, we need to consider many other factors. Take risks, for example - TDM Berhad has 3 warning signs (and 1 which can't be ignored) we think you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.