Imagine Owning Hang Lung Group (HKG:10) And Wondering If The 42% Share Price Slide Is Justified

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Hang Lung Group Limited (HKG:10), since the last five years saw the share price fall 42%.

See our latest analysis for Hang Lung 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).

Looking back five years, both Hang Lung Group's share price and EPS declined; the latter at a rate of 0.2% per year. This reduction in EPS is less than the 10% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The less favorable sentiment is reflected in its current P/E ratio of 4.19.

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

It might be well worthwhile taking a look at our free report on Hang Lung Group'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. 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. In the case of Hang Lung Group, it has a TSR of -33% 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 lost about 4.1% in the twelve months, Hang Lung Group shareholders did even worse, losing 11% (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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7.6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Take risks, for example - Hang Lung Group has 2 warning signs we think you should be aware of.

We will like Hang Lung Group 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.