Should D&G Technology Holding (HKG:1301) Be Disappointed With Their 34% Profit?

By
Simply Wall St
Published
March 13, 2021
SEHK:1301
Source: Shutterstock

The simplest way to invest in stocks is to buy exchange traded funds. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the D&G Technology Holding Company Limited (HKG:1301) share price is 34% higher than it was five years ago, which is more than the market average. Zooming in, the stock is actually down 9.0% in the last year.

See our latest analysis for D&G Technology Holding

D&G Technology Holding wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over the last half decade D&G Technology Holding's revenue has actually been trending down at about 0.8% per year. Despite the lack of revenue growth, the stock has returned a respectable 6%, compound, over that time. To us that suggests that there probably isn't a lot of correlation between the past revenue performance and the share price, but a closer look at analyst forecasts and the bottom line may well explain a lot.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
SEHK:1301 Earnings and Revenue Growth March 14th 2021

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. Dive deeper into the earnings by checking this interactive graph of D&G Technology Holding's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between D&G Technology Holding's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that D&G Technology Holding's TSR of 42% over the last 5 years is better than the share price return.

A Different Perspective

D&G Technology Holding shareholders are down 9.0% for the year, but the market itself is up 36%. 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 7% 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. It's always interesting to track share price performance over the longer term. But to understand D&G Technology Holding better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with D&G Technology Holding (including 1 which can't be ignored) .

D&G Technology Holding is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.
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Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.