We think all investors should try to buy and hold high quality multi-year winners. And we've seen some truly amazing gains over the years. For example, the Huabang Financial Holdings Limited (HKG:3638) share price is up a whopping 591% in the last half decade, a handsome return for long term holders. If that doesn't get you thinking about long term investing, we don't know what will. In the last week the share price is up 5.3%.
It really delights us to see such great share price performance for investors.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Huabang Financial Holdings actually saw its EPS drop 35% per year.
This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
It is not great to see that revenue has dropped by 3.2% per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Huabang Financial Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Huabang Financial Holdings's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Huabang Financial Holdings's TSR of 598% over the last 5 years is better than the share price return.
A Different Perspective
While it's never nice to take a loss, Huabang Financial Holdings shareholders can take comfort that their trailing twelve month loss of 1.0% wasn't as bad as the market loss of around 5.4%. Longer term investors wouldn't be so upset, since they would have made 47%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
But note: Huabang Financial Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 firstname.lastname@example.org. 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.