The total return for Tenaga Nasional Berhad (KLSE:TENAGA) investors has risen faster than earnings growth over the last three years

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, the Tenaga Nasional Berhad (KLSE:TENAGA) share price is up 53% in the last three years, clearly besting the market return of around 6.9% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 38%, including dividends.

Although Tenaga Nasional Berhad has shed RM2.9b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Tenaga Nasional Berhad

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 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.

Tenaga Nasional Berhad was able to grow its EPS at 2.1% per year over three years, sending the share price higher. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. That's not necessarily surprising considering the three-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Tenaga Nasional Berhad has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Tenaga Nasional Berhad the TSR over the last 3 years was 74%, which is better than the share price return mentioned above. 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 38% 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. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Tenaga Nasional Berhad better, we need to consider many other factors. Even so, be aware that Tenaga Nasional Berhad is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.