Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in IBI Group Holdings Limited (HKG:1547) have tasted that bitter downside in the last year, as the share price dropped 35%. That's well bellow the market return of -7.7%. IBI Group Holdings hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. It's down 3.8% in the last seven days.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate twelve months during which the IBI Group Holdings share price fell, it actually saw its earnings per share (EPS) improve by 15%. It's quite possible that growth expectations may have been unreasonable in the past. The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.
Vibrant companies don't usually cut their dividends, so the recent reduction might help explain why the IBI Group Holdings share price has been weak.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on IBI Group Holdings's earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for IBI Group Holdings the TSR over the last year was -30%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We doubt IBI Group Holdings shareholders are happy with the loss of 30% over twelve months (even including dividends). That falls short of the market, which lost 7.7%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 6.3%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
IBI Group Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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.