Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Oversea-Chinese Banking Corporation Limited (SGX:O39) share price is up 53% in the last 5 years, clearly besting the market decline of around 12% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 41% in the last year, including dividends.
The past week has proven to be lucrative for Oversea-Chinese Banking investors, so let's see if fundamentals drove the company's five-year performance.
Check out our latest analysis for Oversea-Chinese Banking
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, Oversea-Chinese Banking moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Oversea-Chinese Banking has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Oversea-Chinese Banking will grow revenue in the future.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Oversea-Chinese Banking's TSR for the last 5 years was 97%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
We're pleased to report that Oversea-Chinese Banking shareholders have received a total shareholder return of 41% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 15%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Oversea-Chinese Banking better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Oversea-Chinese Banking .