Did You Miss Shimao Property Holdings’s (HKG:813) Impressive 194% Share Price Gain?

The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you buy shares in a really great company, you can more than double your money. For instance the Shimao Property Holdings Limited (HKG:813) share price is 194% higher than it was three years ago. Most would be happy with that. On top of that, the share price is up 20% in about a quarter.

See our latest analysis for Shimao Property Holdings

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Shimao Property Holdings was able to grow its EPS at 22% per year over three years, sending the share price higher. This EPS growth is lower than the 43% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It’s not unusual to see the market ‘re-rate’ a stock, after a few years of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

SEHK:813 Past and Future Earnings, January 16th 2020
SEHK:813 Past and Future Earnings, January 16th 2020

We know that Shimao Property Holdings has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Shimao Property Holdings’s TSR for the last 3 years was 245%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It’s nice to see that Shimao Property Holdings shareholders have received a total shareholder return of 47% over the last year. That’s including the dividend. That’s better than the annualised return of 18% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We’ve identified 2 warning signs with Shimao Property Holdings (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

Of course Shimao Property 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.

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.