Investors three-year returns in Teo Seng Capital Berhad (KLSE:TEOSENG) have not grown faster than the company's underlying earnings growth

Teo Seng Capital Berhad (KLSE:TEOSENG) shareholders have seen the share price descend 18% over the month. But that doesn't undermine the rather lovely longer-term return, if you measure over the last three years. Indeed, the share price is up a very strong 100% in that time. So the recent fall in the share price should be viewed in that context. Only time will tell if there is still too much optimism currently reflected in the share price.

While the stock has fallen 15% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

View our latest analysis for Teo Seng Capital 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).

Teo Seng Capital Berhad was able to grow its EPS at 232% per year over three years, sending the share price higher. The average annual share price increase of 26% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat. This cautious sentiment is reflected in its (fairly low) P/E ratio of 3.09.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It is of course excellent to see how Teo Seng Capital Berhad has grown profits over the years, but the future is more important for shareholders. This free interactive report on Teo Seng Capital Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Teo Seng Capital Berhad's TSR for the last 3 years was 112%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Teo Seng Capital Berhad shareholders have received a total shareholder return of 106% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Even so, be aware that Teo Seng Capital Berhad is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.