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Those Who Purchased Hwa Hong (SGX:H19) Shares Three Years Ago Have A 25% Loss To Show For It

Simply Wall St
·4 mins read

It can certainly be frustrating when a stock does not perform as hoped. But when the market is down, you're bound to have some losers. While the Hwa Hong Corporation Limited (SGX:H19) share price is down 25% in the last three years, the total return to shareholders (which includes dividends) was -18%. That's better than the market which returned -20% over the last three years. Unfortunately the last month hasn't been any better, with the share price down 26%. We do note, however, that the broader market is down 26% in that period, and this may have weighed on the share price.

View our latest analysis for Hwa Hong

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the three years that the share price fell, Hwa Hong's earnings per share (EPS) dropped by 0.4% each year. This reduction in EPS is slower than the 9.3% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

SGX:H19 Past and Future Earnings, March 22nd 2020
SGX:H19 Past and Future Earnings, March 22nd 2020

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Hwa Hong's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Hwa Hong, it has a TSR of -18% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's never nice to take a loss, Hwa Hong shareholders can take comfort that , including dividends, their trailing twelve month loss of 19% wasn't as bad as the market loss of around 24%. Given the total loss of 2.2% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Hwa Hong has 5 warning signs (and 2 which are significant) we think you should know about.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.