Generally speaking, the goal of active stock selection is to find companies that provide returns that are higher than the market average. Buying undervalued companies is a path to excess returns. To wit, Astino Berhad’s share price has risen 73% in five years, easily beating the market return of 7.9% (ignoring dividends). On the other hand, the most recent gains were not that impressive, with shareholders only gaining 28%, including dividends.
So let’s investigate and see if the company’s long-term performance is in line with the progress of the underlying business.
See our latest analysis for Astino Berhad
In your essay The Graham-and-Doddsville Superinvestors Warren Buffett described how stock prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market’s perception of a company has changed is to compare the change in earnings per share (EPS) with the share price movement.
During five years of share price growth, Astino Berhad achieved compound earnings per share (EPS) growth of 11% per year. Therefore, the EPS growth rate is quite close to the annualized share price gain of 12% per year. This suggests that market sentiment around the company hasn’t changed much over this period. In fact, the share price appears to largely reflect earnings per share growth.
The image below shows how EPS has tracked over time (if you click on the image you can see more details).
We are pleased to report that the CEO is compensated more modestly than most CEOs at similarly capitalized companies. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow profits over the years. That free interactive report on Astino Berhad earnings, revenue and cash flow is a great place to start if you want to investigate the stock further.
What about dividends?
In addition to measuring share price returns, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay generous dividends, the TSR is often much higher than the share price return. We note that for Astino Berhad the TSR over the last 5 years was 88%, which is better than the share price return mentioned above. And there’s no prize in guessing that dividend payments largely explain the divergence!
A different perspective
Astino Berhad shareholders received twelve-month returns of 28% (including dividends), which is not far from the general market return. Most would be happy with a gain, and it helps that the year’s return is actually better than the five-year average return, which was 14%. Even if share price growth slows from here, there’s a good chance this is a business worth watching over the long term. It is always interesting to monitor share price performance over the long term. But to better understand Astino Berhad, we need to consider many other factors. Take risks, for example – Astino Berhad has 1 warning sign We think you should be aware.
If you are like me, then you will no I want to lose this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St has no position in any of the stocks mentioned.
Do you have feedback on this article? Worried about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
