No-one enjoys it when they lose money on a stock. But it's hard to avoid some disappointing investments when the overall market is down. While the QAF Limited (SGX:Q01) share price is down 18% in the last three years, the total return to shareholders (which includes dividends) was -2.9%. That's better than the market which declined 9.8% over the last three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
QAF saw its EPS decline at a compound rate of 19% per year, over the last three years. This fall in the EPS is worse than the 7% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on QAF's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for QAF the TSR over the last 3 years was -2.9%, 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
It's good to see that QAF has rewarded shareholders with a total shareholder return of 18% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.8% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - QAF has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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QAF Limited, an investment holding company, engages in the manufacture and distribution of bread, bakery, and confectionery products in Singapore, Australia, the Philippines, Malaysia, and internationally.
Flawless balance sheet second-rate dividend payer.