If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Hop Fung Group Holdings Limited (HKG:2320) have had an unfortunate run in the last three years. So they might be feeling emotional about the 69% share price collapse, in that time. The more recent news is of little comfort, with the share price down 27% in a year. Unhappily, the share price slid 4.1% in the last week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Hop Fung Group Holdings saw its EPS decline at a compound rate of 39% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 32% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Hop Fung Group Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Hop Fung Group 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. Its history of dividend payouts mean that Hop Fung Group Holdings's TSR, which was a 65% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
Hop Fung Group Holdings shareholders are down 27% for the year, but the market itself is up 3.3%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 2.5% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Hop Fung Group Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Hop Fung Group Holdings (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.
We will like Hop Fung Group Holdings 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.
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.
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