Suria Capital Holdings Berhad (KLSE:SURIA) shareholders notch a 27% CAGR over 3 years, yet earnings have been shrinking

One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Suria Capital Holdings Berhad (KLSE:SURIA) share price is up 88% in the last three years, clearly besting the market return of around 4.1% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 40%, including dividends.

Since the stock has added RM73m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Suria Capital Holdings 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).

Over the last three years, Suria Capital Holdings Berhad failed to grow earnings per share, which fell 1.1% (annualized).

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. Therefore, it makes sense to look into other metrics.

The modest 1.7% dividend yield is unlikely to be propping up the share price. It may well be that Suria Capital Holdings Berhad revenue growth rate of 7.2% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

This free interactive report on Suria Capital Holdings Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.

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 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. As it happens, Suria Capital Holdings Berhad's TSR for the last 3 years was 105%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Suria Capital Holdings Berhad has rewarded shareholders with a total shareholder return of 40% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Is Suria Capital Holdings Berhad cheap compared to other companies? These 3 valuation measures might help you decide.

But note: Suria Capital Holdings 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.