Stock Analysis

If You Had Bought Best Pacific International Holdings' (HKG:2111) Shares Three Years Ago You Would Be Down 74%

SEHK:2111
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It's not possible to invest over long periods without making some bad investments. But you have a problem if you face massive losses more than once in a while. So spare a thought for the long term shareholders of Best Pacific International Holdings Limited (HKG:2111); the share price is down a whopping 74% in the last three years. That'd be enough to cause even the strongest minds some disquiet. And more recent buyers are having a tough time too, with a drop of 39% in the last year. Unhappily, the share price slid 4.5% in the last week.

Check out our latest analysis for Best Pacific International Holdings

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. 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 three years that the share price fell, Best Pacific International Holdings' earnings per share (EPS) dropped by 13% each year. This reduction in EPS is slower than the 36% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 4.94.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
SEHK:2111 Earnings Per Share Growth December 8th 2020

This free interactive report on Best Pacific International Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Best Pacific International Holdings the TSR over the last 3 years was -72%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 12% in the last year, Best Pacific International Holdings shareholders lost 35% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - Best Pacific International Holdings has 2 warning signs we think you should be aware of.

Of course Best Pacific International Holdings 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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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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