While it may not be enough for some shareholders, we think it is good to see the Stella International Holdings Limited (HKG:1836) share price up 18% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 51% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
Stella International Holdings saw its EPS decline at a compound rate of 23% per year, over the last three years. This fall in EPS isn’t far from the rate of share price decline, which was 21% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Stella International Holdings’s TSR for the last 3 years was -41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While it’s never nice to take a loss, Stella International Holdings shareholders can take comfort that, including dividends, their trailing twelve month loss of 5.0% wasn’t as bad as the market loss of around 9.0%. Of far more concern is the 7.3% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.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 email@example.com. 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.