Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that far outperform the market – but in the process, risk underperformance. That downside risk was realized by Bank Islam Malaysia Berhad (KLSE: BIMB) shareholders over the last year, since the share price has decreased by 21%. That contrasts slightly with the market’s decline of 2.6%. Bank Islam Malaysia Berhad may have better days ahead, of course; we only saw a period of one year.
With this in mind, it’s worth looking at whether the company’s underlying fundamentals have been the driver of long-term performance, or whether there are any discrepancies.
See our latest analysis for Bank Islam Malaysia Berhad
While the hypothesis of efficient markets continues to be taught by some, it has been proven that markets are 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 changed over time.
Unfortunately, Bank Islam Malaysia Berhad reported an EPS drop of 15% for the last year. The 21% drop in stock price is actually more than the drop in EPS. Unsurprisingly, given the lack of EPS growth, the market appears to be more cautious about the stock. The P/E ratio of 12.00 also points to negative market sentiment.
The chart below shows how EPS has changed over time (reveal the exact values by clicking on the image).
Dive deeper into Bank Islam Malaysia Berhad’s key metrics by checking out this interactive Bank Islam Malaysia Berhad chart. earnings, revenue and cash flow.
And Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and the stock price return. The TSR incorporates the value of any spin-off or capital increase discounted, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more complete picture of the return generated by a stock. We note that for Bank Islam Malaysia Berhad the TSR over the last 1 year was -18%, which is better than the share price return mentioned above. The dividends paid by the company have thus boosted total shareholder return.
A different perspective
Since the market has gained 2.6% in the last year, the shareholders of Bank Islam Malaysia Berhad may be disappointed that they have lost 18% (even including dividends). However, keep in mind that even the best stocks sometimes underperform the market over a twelve-month period. The decline in the share price has continued in the last three months, down 0.4%, suggesting a lack of enthusiasm from investors. Basically, most investors should be wary of buying into an underperforming stock unless the business itself is clearly better. It is always interesting to track long-term stock price performance. But to better understand Bank Islam Malaysia Berhad, we need to consider several other factors. Case in point: We spotted 2 warning signs for Bank Islam Malaysia Berhad you must be aware, and 1 of them does not sit too well with us.
If you like buying stocks alongside management, then you might love this free list of companies. (Hint: insiders were bought).
Please note, the market returns mentioned in this article reflect the weighted average market returns of the stocks that currently trade on MY exchanges.
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This Simply Wall St article 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 into account your goals, or your financial situation. We aim to deliver focused long-term analysis driven by fundamental data. Note that our analysis can not factor in the latest announcements of companies sensitive to price or quality material. Simply Wall St has no position in any of the stocks mentioned.
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