The nature of investing is that you win some, and you lose some. Unfortunately, shareholders of SFK Construction Holdings Limited (HKG:1447) have suffered share price declines over the last year. In that relatively short period, the share price has plunged 64%. To make matters worse, the returns over three years have also been really disappointing (the share price is 46% lower than three years ago). Furthermore, it's down 45% in about a quarter. That's not much fun for holders.
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 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).
Unhappily, SFK Construction Holdings had to report a 46% decline in EPS over the last year. The share price decline of 64% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock. The P/E ratio of 5.29 also points to the negative market sentiment.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into SFK Construction Holdings's key metrics by checking this interactive graph of SFK Construction Holdings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between SFK Construction Holdings's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for SFK Construction Holdings shareholders, and that cash payout explains why its total shareholder loss of 63%, over the last year, isn't as bad as the share price return.
A Different Perspective
SFK Construction Holdings shareholders are down 63% for the year, but the broader market is up 2.1%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 13% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Warren Buffett famously said he likes to 'buy when there is blood on the streets', he also focusses on high quality stocks with solid prospects. Before deciding if you like the current share price, check how SFK Construction Holdings scores on these 3 valuation metrics.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.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.