Did ATA IMS Berhad's (KLSE:ATAIMS) Share Price Deserve to Gain 28%?

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the ATA IMS Berhad (KLSE:ATAIMS) share price is up 28% in the last year, clearly besting the market return of around 2.2% (not including dividends). That's a solid performance by our standards! ATA IMS Berhad hasn't been listed for long, so it's still not clear if it is a long term winner.

See our latest analysis for ATA IMS 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 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).

During the last year, ATA IMS Berhad actually saw its earnings per share drop 20%.

This means it's unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.

We are skeptical of the suggestion that the 0.9% dividend yield would entice buyers to the stock. We think that the revenue growth of 7.6% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

A Different Perspective

ATA IMS Berhad boasts a total shareholder return of 30% for the last year (that includes the dividends) . And the share price momentum remains respectable, with a gain of 37% in the last three months. This suggests the company is continuing to win over new investors. 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. Even so, be aware that ATA IMS 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 MY exchanges.

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This article by Simply Wall St is general in nature. 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.
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