UMS Holdings Limited (SGX:558) shareholders have seen the share price descend 12% over the month. But that doesn’t change the fact that the returns over the last five years have been very strong. In fact, the share price is 135% higher today. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Of course, that doesn’t necessarily mean it’s cheap now.
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, UMS Holdings managed to grow its earnings per share at 10% a year. This EPS growth is lower than the 19% average annual increase in the share price. So it’s fair to assume the market has a higher opinion of the business than it did five years ago. That’s not necessarily surprising considering the five-year track record of earnings growth.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that UMS Holdings has improved its bottom line lately, but is it going to grow revenue? Check if analysts think UMS Holdings will grow revenue in the future.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, UMS Holdings’ TSR for the last 5 years was 234%, 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 UMS Holdings shareholders have received a total shareholder return of 57% over one year. That’s including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% 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. Even so, be aware that UMS Holdings is showing 2 warning signs in our investment analysis , you should know about…
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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