Stock Analysis

Should Standard Chem & Pharm (TPE:1720) Be Disappointed With Their 11% Profit?

TWSE:1720
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Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. Unfortunately for shareholders, while the Standard Chem & Pharm CO., LTD. (TPE:1720) share price is up 11% in the last three years, that falls short of the market return. Zooming in, the stock is up a respectable 5.5% in the last year.

View our latest analysis for Standard Chem & Pharm

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.

During three years of share price growth, Standard Chem & Pharm achieved compound earnings per share growth of 5.5% per year. The average annual share price increase of 4% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
TSEC:1720 Earnings Per Share Growth February 16th 2021

We know that Standard Chem & Pharm has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Standard Chem & Pharm will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of Standard Chem & Pharm, it has a TSR of 26% 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

Standard Chem & Pharm shareholders gained a total return of 9.3% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. 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. For example, we've discovered 1 warning sign for Standard Chem & Pharm that you should be aware of before investing here.

We will like Standard Chem & Pharm 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 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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