TSH Resources Berhad (KLSE:TSH) stock performs better than its underlying earnings growth over last five years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the TSH Resources Berhad share price has climbed 32% in five years, easily topping the market return of 9.3% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 17%, including dividends.

Since the stock has added RM152m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

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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 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 five years of share price growth, TSH Resources Berhad achieved compound earnings per share (EPS) growth of 38% per year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.46.

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

We know that TSH Resources Berhad has improved its bottom line lately, but is it going to grow revenue? Check if analysts think TSH Resources Berhad will grow revenue in the future.

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. In the case of TSH Resources Berhad, it has a TSR of 58% 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

We're pleased to report that TSH Resources Berhad shareholders have received a total shareholder return of 17% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 10%. 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. For example, we've discovered 2 warning signs for TSH Resources Berhad (1 doesn't sit too well with us!) that you should be aware of before investing here.

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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.