Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Investors in Southern Cable Group Berhad (KLSE:SCGBHD) have tasted that bitter downside in the last year, as the share price dropped 27%. That’s disappointing when you consider the market declined 0.9%. Southern Cable Group Berhad hasn’t been listed for long, so although we’re wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 13% in the last three months.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Southern Cable Group Berhad
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
Even though the Southern Cable Group Berhad share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It’s fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
Given the yield is quite low, at 0.7%, we doubt the dividend can shed much light on the share price. Southern Cable Group Berhad managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Southern Cable Group Berhad has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Southern Cable Group Berhad will earn in the future (free profit forecasts).
A Different Perspective
We doubt Southern Cable Group Berhad shareholders are happy with the loss of 26% over twelve months (even including dividends). That falls short of the market, which lost 0.9%. That’s disappointing, but it’s worth keeping in mind that the market-wide selling wouldn’t have helped. With the stock down 13% over the last three months, the market doesn’t seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It’s always interesting to track share price performance over the longer term. But to understand Southern Cable Group Berhad better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Southern Cable Group Berhad (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.
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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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