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Imagine Owning Emperor Capital Group (HKG:717) And Trying To Stomach The 91% Share Price Drop

Simply Wall St

We're definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Imagine if you held Emperor Capital Group Limited (HKG:717) for half a decade as the share price tanked 91%. And it's not just long term holders hurting, because the stock is down 59% in the last year. The falls have accelerated recently, with the share price down 17% in the last three months. Of course, this share price action may well have been influenced by the 8.4% decline in the broader market, throughout the period.

While a drop like that is definitely a body blow, money isn't as important as health and happiness.

Check out our latest analysis for Emperor Capital Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

In the last half decade Emperor Capital Group saw its share price fall as its EPS declined below zero. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

SEHK:717 Past and Future Earnings May 8th 2020
SEHK:717 Past and Future Earnings May 8th 2020

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What about the Total Shareholder Return (TSR)?

We've already covered Emperor Capital Group's share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Emperor Capital Group's TSR, which was a 89% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 9.2% in the twelve months, Emperor Capital Group shareholders did even worse, losing 59%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 36% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Emperor Capital Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.