MISC Berhad's (KLSE:MISC) three-year earnings growth trails the shareholder returns

By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, MISC Berhad (KLSE:MISC) shareholders have seen the share price rise 12% over three years, well in excess of the market return (5.5%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 12%, including dividends.

The past week has proven to be lucrative for MISC Berhad investors, so let's see if fundamentals drove the company's three-year performance.

View our latest analysis for MISC 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 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 three years of share price growth, MISC Berhad achieved compound earnings per share growth of 9.8% per year. This EPS growth is higher than the 4% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.

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

It might be well worthwhile taking a look at our free report on MISC Berhad's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of MISC Berhad, it has a TSR of 29% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

MISC Berhad shareholders gained a total return of 12% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. Before forming an opinion on MISC Berhad you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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.