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If You Had Bought Shenwan Hongyuan (H.K.)'s (HKG:218) Shares Five Years Ago You Would Be Down 65%
It is doubtless a positive to see that the Shenwan Hongyuan (H.K.) Limited (HKG:218) share price has gained some 35% in the last three months. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 65% during that time. So we're not so sure if the recent bounce should be celebrated. We'd err towards caution given the long term under-performance.
See our latest analysis for Shenwan Hongyuan (H.K.)
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 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 five years over which the share price declined, Shenwan Hongyuan (H.K.)'s earnings per share (EPS) dropped by 19% each year. In this case, the EPS change is really very close to the share price drop of 19% a year. This implies that the market has had a fairly steady view of the stock. Rather, the share price change has reflected changes in earnings per share.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Shenwan Hongyuan (H.K.) the TSR over the last 5 years was -60%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Shenwan Hongyuan (H.K.) provided a TSR of 1.9% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 10% endured over half a decade. It could well be that the business is stabilizing. 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. For instance, we've identified 4 warning signs for Shenwan Hongyuan (H.K.) (2 are a bit unpleasant) that you should be aware of.
Of course Shenwan Hongyuan (H.K.) 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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About SEHK:218
Shenwan Hongyuan (H.K.)
Engages in the brokerage, corporate finance, asset management, financing and loans, and investment and other businesses in Hong Kong.
Flawless balance sheet very low.