By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, Pan-United Corporation Ltd (SGX:P52) shareholders have seen the share price rise 82% over three years, well in excess of the market return (1.1%, not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 58%, including dividends.
So let’s investigate and see if the longer term performance of the company has been in line with the underlying business’ progress.
See our latest analysis for Pan-United
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During three years of share price growth, Pan-United achieved compound earnings per share growth of 72% per year. This EPS growth is higher than the 22% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.05.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Pan-United has grown profits over the years, but the future is more important for shareholders. This free interactive report on Pan-United’s balance sheet strength is a great place to start, if you want to investigate the stock further.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Pan-United the TSR over the last 3 years was 110%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
It’s good to see that Pan-United has rewarded shareholders with a total shareholder return of 58% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It’s always interesting to track share price performance over the longer term. But to understand Pan-United better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we’ve spotted with Pan-United .
