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Volatility 101: Should Tsit Wing International Holdings (HKG:2119) Shares Have Dropped 11%?

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Tsit Wing International Holdings Limited (HKG:2119) have tasted that bitter downside in the last year, as the share price dropped 11%. That contrasts poorly with the market return of -4.3%. Because Tsit Wing International Holdings hasn't been listed for many years, the market is still learning about how the business performs. In the last ninety days we've seen the share price slide 18%. Of course, this share price action may well have been influenced by the 7.5% decline in the broader market, throughout the period.

See our latest analysis for Tsit Wing International Holdings

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).

During the unfortunate twelve months during which the Tsit Wing International Holdings share price fell, it actually saw its earnings per share (EPS) improve by 44%. Of course, the situation might betray previous over-optimism about growth. It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.

We don't see any weakness in the Tsit Wing International Holdings's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

SEHK:2119 Income Statement, July 31st 2019

We know that Tsit Wing International Holdings has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Tsit Wing International Holdings will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Tsit Wing International Holdings, it has a TSR of -7.7% for the last year. 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

We doubt Tsit Wing International Holdings shareholders are happy with the loss of 7.7% over twelve months (even including dividends). That falls short of the market, which lost 4.3%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. It's worth noting that the last three months did the real damage, with a 18% decline. This probably signals that the business has recently disappointed shareholders - it will take time to win them back. Keeping this in mind, a solid next step might be to take a look at Tsit Wing International Holdings's dividend track record. This free interactive graph is a great place to start.

We will like Tsit Wing International 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.

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 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. Thank you for reading.