By purchasing an index fund, investors can get closer to the average market return. But if you choose individual stocks wisely, you can achieve superior returns. For example, the Singapore Stock Exchange Limited The stock price (SGX: S68) has risen 52% over the past three years, clearly outpacing the market decline of around 7.1% (excluding dividends). On the other hand, returns have not been so good recently, with shareholders only increasing by 42% including dividends.
Check out our latest review for Singapore Exchange
To quote Buffett, “Ships will sail around the world but the Flat Earth Society will thrive. There will continue to be wide spreads between price and value in the market … ‘An imperfect but reasonable way to assess how sentiment around a company has changed is to compare earnings per share (EPS) with the course of action.
During the three years of share price growth, the Singapore Stock Exchange has achieved compound earnings per share growth of 13% per year. We note that the stock price gain of 15% per annum (on average) is not too far removed from the EPS growth rate. Coincidence? Probably not. This observation indicates that the attitude of the market towards the company has not changed much. On the contrary, the share price roughly followed the growth of BPA.
You can see below how the EPS has evolved over time (find out the exact values by clicking on the image).
We know that Singapore Exchange has improved its results lately, but will it increase its income? If you are interested, you can check this free report showing consensus revenue forecast.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. In the case of Singapore Exchange, it has a TSR of 72% for the past 3 years. This exceeds the return on its share price that we mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
It’s nice to see that Singapore Exchange shareholders have received a 42% total shareholder return over the past year. Of course, this includes the dividend. This gain is better than the annual TSR over five years, which is 12%. Therefore, it seems that sentiment around the company has been positive lately. Since the stock price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current stock price, check the Singapore Exchange scores on these 3 valuation metrics.
For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the SG exchanges.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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