Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the Hengdeli Holdings Limited (HKG:3389) share price dropped 78% in the last half decade. That's not a lot of fun for true believers. The falls have accelerated recently, with the share price down 14% in the last three months.
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.
Hengdeli Holdings became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of about 44% per year might also encourage sellers.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Hengdeli Holdings's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Hengdeli Holdings's TSR for the last 5 years was -60%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Hengdeli Holdings has rewarded shareholders with a total shareholder return of 16% in the last twelve months. That's including the dividend. That certainly beats the loss of about 17% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. If you would like to research Hengdeli Holdings in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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.
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.
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.