Shareholders Of United Overseas Bank (SGX:U11) Must Be Happy With Their 50% Return

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term United Overseas Bank Limited (SGX:U11) shareholders have enjoyed a 21% share price rise over the last half decade, well in excess of the market decline of around 8.3% (not including dividends).

Check out our latest analysis for United Overseas Bank

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

United Overseas Bank's earnings per share are down 0.6% per year, despite strong share price performance over five years.

Since EPS is down a bit, and the share price is up, it's probably that the market previously had some concerns about the company, but the reality has been better than feared. In the long term, though, it will be hard for the share price rises to continue without improving EPS.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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. In the case of United Overseas Bank, it has a TSR of 50% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, United Overseas Bank shareholders can take comfort that , including dividends,their trailing twelve month loss of 4.2% wasn't as bad as the market loss of around 8.4%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 8% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Case in point: We've spotted 1 warning sign for United Overseas Bank you should be aware of.

But note: United Overseas Bank 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 SG exchanges.

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This article by Simply Wall St is general in nature. 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.
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