If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the StarHub Ltd (SGX:CC3) share price is 25% higher than it was a year ago, much better than the market return of around 2.3% (not including dividends) in the same period. So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 5.8% in the last three years.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

StarHub was able to grow EPS by 162% in the last twelve months. This EPS growth is significantly higher than the 25% increase in the share price. So it seems like the market has cooled on StarHub, despite the growth. Interesting.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that StarHub has improved its bottom line lately, but is it going to grow revenue? Check if analysts think StarHub will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, StarHub's TSR for the last 1 year was 33%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that StarHub has rewarded shareholders with a total shareholder return of 33% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.7% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand StarHub better, we need to consider many other factors. For example, we've discovered 2 warning signs for StarHub that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singaporean 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com