While Alliance Bank Malaysia Berhad (KLSE:ABMB) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 10% in the last quarter. But that doesn’t undermine the rather lovely longer-term return, if you measure over the last three years. In three years the stock price has launched 109% higher: a great result. After a run like that some may not be surprised to see prices moderate. The thing to consider is whether the underlying business is doing well enough to support the current price.

Since the long term performance has been good but there’s been a recent pullback of 5.1%, let’s check if the fundamentals match the share price.

See our latest analysis for Alliance Bank Malaysia Berhad

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Alliance Bank Malaysia Berhad was able to grow its EPS at 14% per year over three years, sending the share price higher. In comparison, the 28% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.

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 Alliance Bank Malaysia Berhad has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Alliance Bank Malaysia Berhad the TSR over the last 3 years was 134%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It’s nice to see that Alliance Bank Malaysia Berhad shareholders have received a total shareholder return of 4.0% over the last year. That’s including the dividend. That certainly beats the loss of about 1.2% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Case in point: We’ve spotted 2 warning signs for Alliance Bank Malaysia Berhad you should be aware of, and 1 of them makes us a bit uncomfortable.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.