If You Had Bought Quanzhou Huixin Micro-Credit's (HKG:1577) Shares Three Years Ago You Would Be Down 22%

As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Quanzhou Huixin Micro-Credit Co., Ltd. (HKG:1577) shareholders, since the share price is down 22% in the last three years, falling well short of the market decline of around 3.5%.

See our latest analysis for Quanzhou Huixin Micro-Credit

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...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years that the share price fell, Quanzhou Huixin Micro-Credit's earnings per share (EPS) dropped by 32% each year. In comparison the 8% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Quanzhou Huixin Micro-Credit's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Quanzhou Huixin Micro-Credit the TSR over the last 3 years was -11%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Over the last year, Quanzhou Huixin Micro-Credit shareholders took a loss of 3.6%, including dividends. In contrast the market gained about 24%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Unfortunately, the longer term story isn't pretty, with investment losses running at 3% per year over three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Quanzhou Huixin Micro-Credit better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Quanzhou Huixin Micro-Credit you should be aware of, and 1 of them doesn't sit too well with us.

But note: Quanzhou Huixin Micro-Credit may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

When trading Quanzhou Huixin Micro-Credit or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.