It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, in an ideal world, all your stocks would beat the market. One such company is Kian Shen Corporation (TPE:1525), which saw its share price increase 34% in the last year, slightly above the market return of around 33% (not including dividends). Unfortunately the longer term returns are not so good, with the stock falling 17% in the last three years.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the last twelve months, Kian Shen actually shrank its EPS by 17%.
So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
Kian Shen's revenue actually dropped 19% over last year. So the fundamental metrics don't provide an obvious explanation for the share price gain.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Kian Shen, it has a TSR of 39% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Kian Shen provided a TSR of 39% over the year (including dividends). That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 1.1% over the last five years. While 'turnarounds seldom turn' there are green shoots for Kian Shen. It's always interesting to track share price performance over the longer term. But to understand Kian Shen better, we need to consider many other factors. For example, we've discovered 2 warning signs for Kian Shen (1 doesn't sit too well with us!) that you should be aware of before investing here.
Of course Kian Shen may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on TW 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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