Capital A Berhad (KLSE:CAPITALA) shareholders should be happy to see the share price up 15% in the last month. But that can’t change the reality that over the longer term (five years), the returns have been really quite dismal. Indeed, the share price is down 82% in the period. Some might say the recent bounce is to be expected after such a bad drop. Of course, this could be the start of a turnaround. While a drop like that is definitely a body blow, money isn’t as important as health and happiness.
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.
Because Capital A Berhad made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn’t make profits, we’d generally expect to see good revenue growth. That’s because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last five years Capital A Berhad saw its revenue shrink by 28% per year. That puts it in an unattractive cohort, to put it mildly. So it’s not that strange that the share price dropped 13% per year in that period. This kind of price performance makes us very wary, especially when combined with falling revenue. Ironically, that behavior could create an opportunity for the contrarian investor – but only if there are good reasons to predict a brighter future.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Capital A Berhad is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Capital A Berhad stock, you should check out this free report showing analyst consensus estimates for future profits.
What About The Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Capital A Berhad’s total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Capital A Berhad’s TSR of was a loss of 67% for the 5 years. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
We’re pleased to report that Capital A Berhad shareholders have received a total shareholder return of 13% over one year. There’s no doubt those recent returns are much better than the TSR loss of 11% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We’ve spotted 2 warning signs for Capital A Berhad you should be aware of, and 1 of them can’t be ignored.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on MY 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.
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