When we invest, we’re generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the E. Bon Holdings Limited (HKG:599) share price is up 37% in the last 5 years, clearly besting than the market return of around 20% (ignoring dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 1.1%, including dividends.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, E. Bon Holdings achieved compound earnings per share (EPS) growth of 9.3% per year. This EPS growth is higher than the 6.5% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.22.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on E. Bon Holdings’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of E. Bon Holdings, it has a TSR of 94% 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
It’s nice to see that E. Bon Holdings shareholders have received a total shareholder return of 1.1% over the last year. That’s including the dividend. However, that falls short of the 14% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. Importantly, we haven’t analysed E. Bon Holdings’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of 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.
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 firstname.lastname@example.org. 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.