The simplest way to invest in stocks is to buy exchange traded funds. But investors can boost returns by picking market-beating companies to own shares in. For example, the RGB International Bhd. (KLSE:RGB) share price is up 91% in the last 1 year, clearly besting the market decline of around 5.7% (not including dividends). That’s a solid performance by our standards! Looking back further, the stock price is 57% higher than it was three years ago.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for RGB International Bhd
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).
During the last year RGB International Bhd grew its earnings per share, moving from a loss to a profit.
When a company has just transitioned to profitability, earnings per share growth is not always the best way to look at the share price action.
We doubt the modest 0.5% dividend yield is doing much to support the share price. However the year on year revenue growth of 27% would help. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at RGB International Bhd’s financial health with this free report on its balance sheet.
A Different Perspective
It’s good to see that RGB International Bhd has rewarded shareholders with a total shareholder return of 91% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 1.8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with RGB International Bhd (at least 1 which is concerning) , and understanding them should be part of your investment process.
We will like RGB International Bhd 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 Malaysian exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using 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 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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