Investors in Tenaga Nasional Berhad (KLSE:TENAGA) have seen respectable returns of 71% over the past three years

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. Just take a look at Tenaga Nasional Berhad (KLSE:TENAGA), which is up 51%, over three years, soundly beating the market decline of 4.9% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 21% in the last year, including dividends.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Our free stock report includes 2 warning signs investors should be aware of before investing in Tenaga Nasional Berhad. Read for free now.

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Tenaga Nasional Berhad achieved compound earnings per share growth of 8.1% per year. In comparison, the 15% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Tenaga Nasional Berhad has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Tenaga Nasional Berhad's TSR for the last 3 years was 71%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Tenaga Nasional Berhad shareholders have received a total shareholder return of 21% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Tenaga Nasional Berhad is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.