Did Henderson Land Development's (HKG:12) Share Price Deserve to Gain 56%?
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When we invest, we're generally looking for stocks that outperform the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Henderson Land Development Company Limited (HKG:12) share price is up 56% in the last 5 years, clearly besting than the market return of around 6.9% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 22%, including dividends.
See our latest analysis for Henderson Land Development
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During five years of share price growth, Henderson Land Development achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is higher than the 9.3% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 6.82 also suggests market apprehension.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Henderson Land Development's key metrics by checking this interactive graph of Henderson Land Development'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. 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. We note that for Henderson Land Development the TSR over the last 5 years was 80%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Henderson Land Development has rewarded shareholders with a total shareholder return of 22% 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 12% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Henderson Land Development you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course Henderson Land Development may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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.
