Malaysia Smelting Corporation Berhad (KLSE:MSC) shareholder returns have been impressive, earning 296% in 5 years

When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of Malaysia Smelting Corporation Berhad (KLSE:MSC) stock is up an impressive 199% over the last five years. Also pleasing for shareholders was the 31% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Since the stock has added RM160m 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 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.

During the last half decade, Malaysia Smelting Corporation Berhad became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains.

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

We know that Malaysia Smelting Corporation Berhad has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Malaysia Smelting Corporation Berhad the TSR over the last 5 years was 296%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Malaysia Smelting Corporation Berhad has rewarded shareholders with a total shareholder return of 49% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 32%. Therefore it seems like sentiment around the company has been positive lately. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Malaysia Smelting Corporation Berhad , and understanding them should be part of your investment process.

But note: Malaysia Smelting Corporation Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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.