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Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term Magnificent Hotel Investments Limited (HKG:201) shareholders for doubting their decision to hold, with the stock down 51% over a half decade. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.6%.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Looking back five years, both Magnificent Hotel Investments's share price and EPS declined; the latter at a rate of 16% per year. This change in EPS is reasonably close to the 13% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Magnificent Hotel Investments's key metrics by checking this interactive graph of Magnificent Hotel Investments'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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Magnificent Hotel Investments's TSR for the last 5 years was -28%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Magnificent Hotel Investments shareholders can take comfort that, including dividends, their trailing twelve month loss of 0.9% wasn't as bad as the market loss of around 1.1%. Of far more concern is the 6.5% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. Importantly, we haven't analysed Magnificent Hotel Investments's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
We will like Magnificent Hotel Investments 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.