Earnings growth of 3.2% over 1 year hasn't been enough to translate into positive returns for ManpowerGroup Greater China (HKG:2180) shareholders

By
Simply Wall St
Published
March 17, 2022
SEHK:2180
Source: Shutterstock

It's easy to feel disappointed if you buy a stock that goes down. But sometimes broader market conditions have more of an impact on prices than the actual business performance. So while the ManpowerGroup Greater China Limited (HKG:2180) share price is down 22% in the last year, the total return to shareholders (which includes dividends) was -19%. That's better than the market which declined 31% over the last year. ManpowerGroup Greater China may have better days ahead, of course; we've only looked at a one year period. And the share price decline continued over the last week, dropping some 13%. But this could be related to the soft market, which is down about 12% in the same period.

Since ManpowerGroup Greater China has shed CN¥255m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

Check out our latest analysis for ManpowerGroup Greater China

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the unfortunate twelve months during which the ManpowerGroup Greater China share price fell, it actually saw its earnings per share (EPS) improve by 3.2%. It's quite possible that growth expectations may have been unreasonable in the past.

It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.

ManpowerGroup Greater China managed to grow revenue over the last year, which is usually a real positive. Since we can't easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
SEHK:2180 Earnings and Revenue Growth March 17th 2022

Take a more thorough look at ManpowerGroup Greater China's financial health with this free report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ManpowerGroup Greater China's TSR for the last 1 year was -19%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's not great that ManpowerGroup Greater China shares failed to make money for shareholders in the last year, but the silver lining is that the loss of 19%, including dividends, wasn't as bad as the broader market loss of about 31%. Unfortunately for shareholders, the share price momentum hasn't improved much with the stock down 11% in around 90 days. This doesn't look great to us, but it is possible that the market is over-reacting to prior disappointment. 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 ManpowerGroup Greater China , and understanding them should be part of your investment process.

Of course ManpowerGroup Greater China 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.

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