U.S. Markets open in 55 mins

Did Changing Sentiment Drive SH Group (Holdings)'s (HKG:1637) Share Price Down By 15%?

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Unfortunately the SH Group (Holdings) Limited (HKG:1637) share price slid 15% over twelve months. That contrasts poorly with the market return of 9.2%. Because SH Group (Holdings) hasn't been listed for many years, the market is still learning about how the business performs. The good news is that the stock is up 6.5% in the last week.

See our latest analysis for SH Group (Holdings)

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Unfortunately SH Group (Holdings) reported an EPS drop of 36% for the last year. This fall in the EPS is significantly worse than the 15% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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

SEHK:1637 Past and Future Earnings, October 30th 2019

This free interactive report on SH Group (Holdings)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of SH Group (Holdings), it has a TSR of -12% for the last year. 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

Given that the market gained 9.2% in the last year, SH Group (Holdings) shareholders might be miffed that they lost 12% (even including dividends) . While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 5.7%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before forming an opinion on SH Group (Holdings) you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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

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.

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. Thank you for reading.