The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the NVC Lighting Holding Limited (HKG:2222) share price is up 98% in the last year, clearly besting the market return of around 1.0% (not including dividends). So that should have shareholders smiling. The longer term returns have not been as good, with the stock price only 5.7% higher than it was three years ago.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During the last year NVC Lighting Holding saw its earnings per share (EPS) drop below zero. While some may see this as temporary, we're a skeptical bunch, and so we're a little surprised to see the share price go up. It may be that the company has done well on other metrics.
However the year on year revenue growth of 36% would help. Many businesses do go through a faze where they have to forgo some profits to drive business development, and sometimes its for the best.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between NVC Lighting Holding's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for NVC Lighting Holding shareholders, and that cash payout contributed to why its TSR of 113%, over the last year, is better than the share price return.
A Different Perspective
We're pleased to report that NVC Lighting Holding rewarded shareholders with a total shareholder return of 113% over the last year. So this year's TSR was actually better than the three-year TSR (annualized) of 5.1%. Given the track record of solid returns over varying time frames, it might be worth putting NVC Lighting Holding on your watchlist. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like NVC Lighting Holding better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, 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.
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.