Why Have Keppel Corporation Limited’s Shares Lost 42% In Value Over The Last 5 Years?

A veteran investor once told me: “Investing is about giving up your purchasing power today in the hopes of getting higher purchasing power in the future.”

In stock market investing, the above quote translates into buying stocks that will increase in value in the future, both through an appreciation in a stock’s price and the dividends the stock distributes.

Both factors – price appreciation and dividends – are generally derived from the same source, a company’s profit.

This profit is, in turn, driven by a company’s business performance. In general, companies with strong businesses exhibit sustainable growth, high margins, high returns on equity, and low gearing (gearing is a gauge of how much debt a company’s employing).

In here, I want to look at the business performance of Keppel Corporation Limited (SGX: BN4) over its last five completed fiscal years and track its total returns in that period (total returns would factor in the gains from reinvested dividends along with the stock’s price changes).

Here’s a table showing Keppel Corporation’s business performance:

Keppel Corp business performance
Source: S&P Global Market Intelligence

We can see from the table that Keppel Corporation’s revenue in 2015 is essentially flat when compared to 2011. Meanwhile, the company’s operating income, operating margin, return on equity, earnings per share, and gearing, are all trending in the wrong direction (down for the first four and up for the last).

Over the last five years since 12 May 2011, Keppel Corporation’s shares have delivered a total return of a negative 42%.

As you can see, there is some correlation between the business performance and total returns of Keppel Corporation. Most of the company’s business metrics seen in the table above have declined when compared to prior years, which might explain the loss in value in the stock.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.