Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don’t succeed. For example, after five long years the Embry Holdings Limited (HKG:1388) share price is a whole 74% lower. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 38%.
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.
In the last half decade Embry Holdings saw its share price fall as its EPS declined below zero. This was, in part, due to extraordinary items impacting earnings. At present it’s hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Embry Holdings’ key metrics by checking this interactive graph of Embry Holdings’s earnings, revenue and cash flow.
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. In the case of Embry Holdings, it has a TSR of -70% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 5.3% in the last year, Embry Holdings shareholders lost 35% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild 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 Embry Holdings better, we need to consider many other factors. For example, we’ve discovered 3 warning signs for Embry Holdings (1 is concerning!) that you should be aware of before investing here.
Of course Embry Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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