Air Asia Co., Ltd. (TPE:2630) shareholders should be happy to see the share price up 11% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. After all, the share price is down 54% in the last three years, significantly under-performing the market.
View our latest analysis for Air Asia
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. 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).
Air Asia saw its EPS decline at a compound rate of 31% per year, over the last three years. In comparison the 23% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 48.02, it's fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Air Asia's key metrics by checking this interactive graph of Air Asia's earnings, revenue and cash flow.
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. In the case of Air Asia, it has a TSR of -50% for the last 3 years. 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
The last twelve months weren't great for Air Asia shares, which cost holders 3.1%, including dividends, while the market was up about 36%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 14% per year over three years. We'd need clear signs of growth in the underlying business before we could muster much enthusiasm for this one. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with Air Asia (at least 2 which can't be ignored) , and understanding them should be part of your investment process.
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 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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About TWSE:2630
Air Asia
Operates as an aircraft maintenance company in Taiwan, rest of Asia, and internationally.
Solid track record with adequate balance sheet.
