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Did Changing Sentiment Drive Asia Commercial Holdings's (HKG:104) Share Price Down By 34%?

Simply Wall St

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Investors in Asia Commercial Holdings Limited (HKG:104) have tasted that bitter downside in the last year, as the share price dropped 34%. That falls noticeably short of the market return of around -5.2%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 7.1% in three years. Unhappily, the share price slid 3.3% in the last week.

See our latest analysis for Asia Commercial Holdings

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Unfortunately Asia Commercial Holdings reported an EPS drop of 23% for the last year. The share price decline of 34% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 5.13 also points to the negative market sentiment.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

SEHK:104 Past and Future Earnings, February 28th 2020

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Asia Commercial Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Asia Commercial Holdings the TSR over the last year was -30%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Asia Commercial Holdings shareholders are down 30% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 5.2%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 2.5% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Asia Commercial Holdings has 3 warning signs we think you should be aware of.

Asia Commercial Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.