Advertisement
New Zealand markets closed
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NZD/USD

    0.5977
    -0.0029 (-0.48%)
     
  • NZD/EUR

    0.5533
    -0.0010 (-0.17%)
     
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • OIL

    83.10
    +1.75 (+2.15%)
     
  • GOLD

    2,241.40
    +28.70 (+1.30%)
     
  • NASDAQ

    18,286.78
    +5.94 (+0.03%)
     
  • FTSE

    7,952.62
    +20.64 (+0.26%)
     
  • Dow Jones

    39,865.81
    +105.73 (+0.27%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     
  • NZD/JPY

    90.4340
    -0.3460 (-0.38%)
     

Shareholders in Singapore Technologies Engineering (SGX:S63) are in the red if they invested three years ago

Singapore Technologies Engineering Ltd (SGX:S63) shareholders should be happy to see the share price up 11% in the last month. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 18% in the last three years, significantly under-performing the market.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for Singapore Technologies Engineering

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).

ADVERTISEMENT

Although the share price is down over three years, Singapore Technologies Engineering actually managed to grow EPS by 1.7% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

It looks to us like the market was probably too optimistic around growth three years ago. Looking to other metrics might better explain the share price change.

Given the healthiness of the dividend payments, we doubt that they've concerned the market. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
earnings-and-revenue-growth

Singapore Technologies Engineering is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Singapore Technologies Engineering will earn in the future (free analyst consensus estimates)

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given 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 raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Singapore Technologies Engineering the TSR over the last 3 years was -6.6%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Singapore Technologies Engineering had a tough year, with a total loss of 8.2% (including dividends), against a market gain of about 0.5%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Singapore Technologies Engineering you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here