Shareholders in PETRONAS Chemicals Group Berhad (KLSE:PCHEM) are in the red if they invested three years ago

The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of PETRONAS Chemicals Group Berhad (KLSE:PCHEM) have had an unfortunate run in the last three years. So they might be feeling emotional about the 62% share price collapse, in that time. And more recent buyers are having a tough time too, with a drop of 46% in the last year. Furthermore, it's down 25% in about a quarter. That's not much fun for holders.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

PETRONAS Chemicals Group Berhad saw its EPS decline at a compound rate of 46% per year, over the last three years. In comparison the 27% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on PETRONAS Chemicals Group Berhad's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for PETRONAS Chemicals Group Berhad the TSR over the last 3 years was -58%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 0.3% in the twelve months, PETRONAS Chemicals Group Berhad shareholders did even worse, losing 45% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.6% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand PETRONAS Chemicals Group Berhad better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for PETRONAS Chemicals Group Berhad you should be aware of.

We will like PETRONAS Chemicals Group Berhad better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.