Did Changing Sentiment Drive Hong Kong Shanghai Alliance Holdings's (HKG:1001) Share Price Down By 48%?

The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Hong Kong Shanghai Alliance Holdings Limited (HKG:1001) shareholders for doubting their decision to hold, with the stock down 48% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 33% over the last twelve months. The silver lining is that the stock is up 4.4% in about a week.

View 5 warning signs we detected for Hong Kong Shanghai Alliance Holdings

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.

During five years of share price growth, Hong Kong Shanghai Alliance Holdings moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.

We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of about 7.3% per year might also encourage sellers.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

While the share price may move with revenue, other factors can also play a role. For example, we've discovered 5 warning signs for Hong Kong Shanghai Alliance Holdings (of which 2 are major) which any shareholder or potential investor should be aware of.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Hong Kong Shanghai Alliance Holdings, it has a TSR of -36% for the last 5 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 the broader market gained around 11% in the last year, Hong Kong Shanghai Alliance Holdings shareholders lost 30% (even including dividends) . 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 8.6% 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 Hong Kong Shanghai Alliance Holdings you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

We will like Hong Kong Shanghai Alliance 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 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.