The simplest way to invest in stocks is to buy exchange traded funds. But if you pick the right individual stocks, you could make more than that. To wit, the Home Control International Limited (HKG:1747) share price is 57% higher than it was a year ago, much better than the market return of around 40% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! We'll need to follow Home Control International for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Home Control International was able to grow EPS by 14% in the last twelve months. The share price gain of 57% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Home Control International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Home Control International's TSR for the last year was 62%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Home Control International boasts a total shareholder return of 62% for the last year (that includes the dividends) . A substantial portion of that gain has come in the last three months, with the stock up 18% in that time. This suggests the company is continuing to win over new investors. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Home Control International has 4 warning signs (and 1 which is a bit concerning) we think you should know about.
We will like Home Control International 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.
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