Justin Allen Holdings' (HKG:1425) Shareholders Are Down 12% On Their Shares

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Justin Allen Holdings Limited (HKG:1425) share price is down 12% in the last year. That's disappointing when you consider the market returned 12%. Because Justin Allen Holdings hasn't been listed for many years, the market is still learning about how the business performs. There was little comfort for shareholders in the last week as the price declined a further 1.3%.

See our latest analysis for Justin Allen Holdings

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the unfortunate twelve months during which the Justin Allen Holdings share price fell, it actually saw its earnings per share (EPS) improve by 27%. Of course, the situation might betray previous over-optimism about growth.

It's fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

We don't see any weakness in the Justin Allen Holdings' dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

If you are thinking of buying or selling Justin Allen Holdings stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Justin Allen Holdings the TSR over the last year was -6.6%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While Justin Allen Holdings shareholders are down 6.6% for the year (even including dividends), the market itself is up 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 5.1% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand Justin Allen Holdings better, we need to consider many other factors. Even so, be aware that Justin Allen Holdings is showing 2 warning signs in our investment analysis , you should know about...

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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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