Did You Participate In Any Of SBS Transit's (SGX:S61) Respectable 78% Return?

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the SBS Transit share price has climbed 56% in five years, easily topping the market decline of 10% (ignoring dividends).

See our latest analysis for SBS Transit

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

During five years of share price growth, SBS Transit achieved compound earnings per share (EPS) growth of 32% per year. This EPS growth is higher than the 9% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

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

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between SBS Transit's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. SBS Transit's TSR of 78% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

We regret to report that SBS Transit shareholders are down 19% for the year. Unfortunately, that's worse than the broader market decline of 10%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before deciding if you like the current share price, check how SBS Transit scores on these 3 valuation metrics.

We will like SBS Transit better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider 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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