Yahoo Finance 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) shareholders have earned a 8.2% CAGR over the last five years
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) share price is up 36% in the last 5 years, clearly besting the market return of around 6.7% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 2.4%, including dividends.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for 7-Eleven Malaysia Holdings Berhad
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
7-Eleven Malaysia Holdings Berhad's earnings per share are down 13% per year, despite strong share price performance over five years. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We doubt the modest 1.4% dividend yield is attracting many buyers to the stock. On the other hand, 7-Eleven Malaysia Holdings Berhad's revenue is growing nicely, at a compound rate of 7.0% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on 7-Eleven Malaysia Holdings Berhad's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
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 7-Eleven Malaysia Holdings Berhad the TSR over the last 5 years was 48%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
7-Eleven Malaysia Holdings Berhad shareholders gained a total return of 2.4% during the year. But that return falls short of the market. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 8% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand 7-Eleven Malaysia Holdings Berhad better, we need to consider many other factors. For instance, we've identified 1 warning sign for 7-Eleven Malaysia Holdings Berhad that you should be aware of.
But note: 7-Eleven Malaysia Holdings Berhad may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
