If You Had Bought Shenguan Holdings (Group) (HKG:829) Stock Five Years Ago, You'd Be Sitting On A 88% Loss, Today

Shenguan Holdings (Group) Limited (HKG:829) shareholders should be happy to see the share price up 12% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 88% lower after that period. The recent bounce might mean the long decline is over, but we are not confident. The million dollar question is whether the company can justify a long term recovery.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

Check out our latest analysis for Shenguan Holdings (Group)

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the five years over which the share price declined, Shenguan Holdings (Group)'s earnings per share (EPS) dropped by 32% each year. Notably, the share price has fallen at 35% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on Shenguan Holdings (Group)'s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Shenguan Holdings (Group)'s TSR for the last 5 years was -81%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market lost about 2.5% in the twelve months, Shenguan Holdings (Group) shareholders did even worse, losing 3.1% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. However, the loss over the last year isn't as bad as the 28% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Shenguan Holdings (Group) has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Shenguan Holdings (Group) 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 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. Thank you for reading.