The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term Wonderful Sky Financial Group Holdings Limited (HKG:1260) shareholders have had a particularly rough ride in the last three year. Unfortunately, they have held through a 67% decline in the share price in that time. The more recent news is of little comfort, with the share price down 43% in a year. Furthermore, it's down 18% in about a quarter. That's not much fun for holders.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Wonderful Sky Financial Group Holdings saw its EPS decline at a compound rate of 13% per year, over the last three years. This reduction in EPS is slower than the 31% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 5.47.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. We note that for Wonderful Sky Financial Group Holdings the TSR over the last 3 years was -63%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Wonderful Sky Financial Group Holdings shareholders are down 41% for the year (even including dividends) , but the market itself is up 4.7%. 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 9.4% 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 businesses. Before forming an opinion on Wonderful Sky Financial Group Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: Wonderful Sky Financial Group Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.