Yahoo Finance Investors Who Bought Avarga (SGX:U09) Shares Three Years Ago Are Now Down 49%
For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Avarga Limited (SGX:U09) shareholders have had that experience, with the share price dropping 49% in three years, versus a market return of about -19%. The more recent news is of little comfort, with the share price down 38% in a year. More recently, the share price has dropped a further 9.2% in a month. We do note, however, that the broader market is down 25% in that period, and this may have weighed on the share price.
View our latest analysis for Avarga
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Although the share price is down over three years, Avarga actually managed to grow EPS by 32% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Revenue is actually up 33% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Avarga more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Avarga's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Avarga's TSR for the last 3 years was -32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
The total return of 24% received by Avarga shareholders over the last year isn't far from the market return of -23%. So last year was actually even worse than the last five years, which cost shareholders 1.1% per year. It will probably take a substantial improvement in the fundamental performance for the company to reverse this 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. Even so, be aware that Avarga is showing 4 warning signs in our investment analysis , you should know about...
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
