Theta Edge Berhad (KLSE:THETA) shareholder returns have been enviable, earning 430% in 5 years

Buying shares in the best businesses can build meaningful wealth for you and your family. While not every stock performs well, when investors win, they can win big. Don't believe it? Then look at the Theta Edge Berhad (KLSE:THETA) share price. It's 411% higher than it was five years ago. If that doesn't get you thinking about long term investing, we don't know what will. And in the last month, the share price has gained 71%.

Since the stock has added RM29m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Theta Edge Berhad

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Theta Edge Berhad moved from a loss to profitability. 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 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?

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 Theta Edge Berhad the TSR over the last 5 years was 430%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Theta Edge Berhad has rewarded shareholders with a total shareholder return of 257% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 40%. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Theta Edge Berhad (of which 2 are a bit concerning!) you should know about.

We will like Theta Edge 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com