How Much Did High Fashion International's(HKG:608) Shareholders Earn From Share Price Movements Over The Last Five Years?

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. So we wouldn't blame long term High Fashion International Limited (HKG:608) shareholders for doubting their decision to hold, with the stock down 41% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 24% over the last twelve months.

Check out our latest analysis for High Fashion International

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, High Fashion International's earnings per share (EPS) dropped by 23% each year. This fall in the EPS is worse than the 10% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between High Fashion International's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that High Fashion International's TSR, which was a 32% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

High Fashion International shareholders are down 23% for the year, but the market itself is up 12%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% 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. It's always interesting to track share price performance over the longer term. But to understand High Fashion International better, we need to consider many other factors. Even so, be aware that High Fashion International is showing 5 warning signs in our investment analysis , and 2 of those are concerning...

High Fashion International is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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