Bermaz Auto Berhad's (KLSE:BAUTO) Shareholders Are Down 40% On Their Shares

As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Bermaz Auto Berhad (KLSE:BAUTO) shareholders have had that experience, with the share price dropping 40% in three years, versus a market decline of about 5.3%. The more recent news is of little comfort, with the share price down 32% in a year. More recently, the share price has dropped a further 8.4% in a month.

Check out our latest analysis for Bermaz Auto Berhad

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Bermaz Auto Berhad saw its EPS decline at a compound rate of 10% per year, over the last three years. This reduction in EPS is slower than the 16% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Bermaz Auto Berhad's TSR for the last 3 years was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Bermaz Auto Berhad shareholders are down 30% for the year (even including dividends), but the market itself is up 4.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.5% over the last half decade. 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. 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 2 warning signs with Bermaz Auto Berhad , and understanding them should be part of your investment process.

Of course Bermaz Auto Berhad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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