The five-year loss for Top Glove Corporation Bhd (KLSE:TOPGLOV) shareholders likely driven by its shrinking earnings

Top Glove Corporation Bhd. (KLSE:TOPGLOV) shareholders should be happy to see the share price up 13% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 63% in that time. Some might say the recent bounce is to be expected after such a bad drop. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.

While the last five years has been tough for Top Glove Corporation Bhd shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative 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 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).

Top Glove Corporation Bhd became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

Arguably, the revenue drop of 30% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. So it makes a lot of sense to check out what analysts think Top Glove Corporation Bhd will earn in the future (free profit forecasts).

What About The Total Shareholder Return (TSR)?

We've already covered Top Glove Corporation Bhd's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Top Glove Corporation Bhd's TSR, which was a 57% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

It's nice to see that Top Glove Corporation Bhd shareholders have received a total shareholder return of 1.7% over the last year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Top Glove Corporation Bhd better, we need to consider many other factors. Take risks, for example - Top Glove Corporation Bhd has 1 warning sign we think you should be aware of.

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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.