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Did Changing Sentiment Drive Dragon Crown Group Holdings's (HKG:935) Share Price Down A Worrying 59%?

Simply Wall St

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term Dragon Crown Group Holdings Limited (HKG:935) shareholders. Regrettably, they have had to cope with a 59% drop in the share price over that period. On top of that, the share price is down 6.3% in the last week. However, this move may have been influenced by the broader market, which fell 3.7% in that time.

Check out our latest analysis for Dragon Crown Group Holdings

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Dragon Crown Group Holdings saw its EPS decline at a compound rate of 17% per year, over the last three years. This reduction in EPS is slower than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SEHK:935 Past and Future Earnings, January 25th 2020

It might be well worthwhile taking a look at our free report on Dragon Crown Group Holdings's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Dragon Crown Group Holdings, it has a TSR of -54% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Dragon Crown Group Holdings had a tough year, with a total loss of 13% (including dividends) , against a market gain of about 4.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4.9% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality 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. Be aware that Dragon Crown Group Holdings is showing 3 warning signs in our investment analysis , and 1 of those is concerning...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.