Did You Participate In Any Of Far East Horizon's (HKG:3360) Respectable 69% Return?

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Far East Horizon Limited (HKG:3360) share price is up 38% in the last five years, that's less than the market return. However, if you include the dividends then the return is market beating. Looking at the last year alone, the stock is up 14%.

See our latest analysis for Far East Horizon

There is no denying that markets are sometimes efficient, but prices do not always reflect 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).

During five years of share price growth, Far East Horizon achieved compound earnings per share (EPS) growth of 8.1% per year. This EPS growth is higher than the 7% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.16.

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

Dive deeper into Far East Horizon's key metrics by checking this interactive graph of Far East Horizon'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. 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 and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Far East Horizon, it has a TSR of 69% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Far East Horizon shareholders gained a total return of 20% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 11% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Far East Horizon better, we need to consider many other factors. For example, we've discovered 3 warning signs for Far East Horizon (1 is a bit unpleasant!) that you should be aware of before investing here.

But note: Far East Horizon 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.

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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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