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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Unfortunately the LHT Holdings Limited (SGX:BEI) share price slid 13% over twelve months. That falls noticeably short of the market return of around 7.1%. On the bright side, the stock is actually up 13% in the last three years. It’s down 16% in about a quarter.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unhappily, LHT Holdings had to report a 54% decline in EPS over the last year. The share price fall of 13% isn’t as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of LHT Holdings’s earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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 LHT Holdings, it has a TSR of -9.1% 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
While the broader market gained around 7.1% in the last year, LHT Holdings shareholders lost 9.1% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 6.1% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
LHT Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG 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 email@example.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.