When buying shares in a company, it's worth bearing in mind that the company could fail and you could lose money. However, on a lighter note, a good company can have its stock price rise well over 100%. One great example is Kobei Technology Co., Ltd. (KLSE:KOBAY) share price is up 269% in five years. It has increased by 41% in about one month.
So let's assess the underlying fundamentals over the past five years to see if they have kept pace with shareholder returns.
Check out our latest analysis for Kobay Technology Bhd.
Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that overreact and that investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
During Kobay Technology Bhd's five-year share price rise, its EPS actually decreased by 6.9% per year.
This means the market is unlikely to be valuing the company based on its earnings growth. Since changes in EPS don't seem to correlate with changes in share price, it's worth looking at other metrics.
We don't see the modest 1.2% dividend yield attracting many buyers to this stock. In contrast, 17% annualized earnings growth is probably a sign that Kobay Technology Bhd is growing, which we think is materially positive. It's quite possible that management is prioritizing revenue growth over EPS growth at this point.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
You can see how this balance sheet has strengthened (or weakened) over time. free Interactive graphics.
What will happen to the dividend?
It's important to consider not only the share price return, but also the total shareholder return for a particular stock. 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 increases and spin-offs. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. For Kobay Technology Bhd, the TSR for the last 5 years is 296%. This exceeds the stock return mentioned earlier. Therefore, the dividend paid by the company is total Shareholder returns.
different perspective
Investors in Kobay Technology Bhd have had a tough year, with a total loss of 30% (including dividends), compared to a market return of around 14%. Even blue-chip stocks can see their share prices drop from time to time, and we like to see improvement in a company's fundamental metrics before we get too interested. On the bright side, long term shareholders have made money, with a return of 32% per year over 50 years. The recent selloff could be an opportunity, so it might be worth checking the fundamental data for signs of a long-term growth trend. I think it's very interesting to look at stock price over the long term as an indicator of business performance. But to really gain insight, you need to consider other information as well. For example, we identified 1 warning sign for Kobay Technology Bhd What you need to know.
If you want to check out another company with potentially better financials, don't miss this free A list of companies that have proven they can grow their revenue.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Malaysian exchanges.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
