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, the Tat Seng Packaging Group Ltd (SGX:T12) share price is up 67% in the last 5 years, clearly besting the market decline of around 23% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 23% , including dividends .
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, Tat Seng Packaging Group managed to grow its earnings per share at 9.5% a year. This EPS growth is reasonably close to the 11% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Tat Seng Packaging Group's key metrics by checking this interactive graph of Tat Seng Packaging Group's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Tat Seng Packaging Group the TSR over the last 5 years was 116%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Tat Seng Packaging Group shareholders have received a total shareholder return of 23% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 17%. 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. Case in point: We've spotted 3 warning signs for Tat Seng Packaging Group you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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