Singapura Finance Ltd, listed on the SGX:S23, has seen its stock price decline by 25% over the past five years, leading shareholders to question their decision to hold onto the stock. Despite this decline, the company’s earnings per share (EPS) have actually improved by 15% per year during the same period, suggesting that there may be other factors influencing market sentiment. Looking at the company’s fundamentals, it is clear that the dividend has remained healthy, ruling out a decline in dividends as the cause for the drop in the share price. To gain a better understanding of the changing market sentiment, it is necessary to look at other metrics.
One possible explanation for the decline in the share price is that the market was previously overly optimistic, causing disappointment even with improving EPS. It is also important to consider the total shareholder return, which includes the value of dividends and any discounted capital raising or spin-off. In the case of Singapura Finance, the TSR over the past five years is -9.3%, exceeding the negative share price return. This indicates that dividends paid by the company have boosted the overall shareholder return. However, investors should be cautious as the stock has underperformed the market and experienced a total loss of 1.8% per year over the past five years.
While long-term share price weakness can be concerning, contrarian investors may see potential for a turnaround. To fully understand the company, it is necessary to consider other factors such as its balance sheet strength and potential warning signs. Investors interested in buying stocks alongside management can also explore a list of companies where insiders have been buying shares. It is important to note that the market returns mentioned in the article reflect the market weighted average returns of stocks trading on Singaporean exchanges.