Get Nice Holdings (HKG:64) spikes 15% this week, taking five-year gains to 64%

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Get Nice Holdings Limited (HKG:64) shareholders have enjoyed a 24% share price rise over the last half decade, well in excess of the market return of around 8.5% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 2.1% in the last year, including dividends.

Since the stock has added HK$235m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We've discovered 2 warning signs about Get Nice Holdings. View them for free.

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 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 five years of share price growth, Get Nice Holdings actually saw its EPS drop 15% per year. The impact of extraordinary items on earnings, in the last year, partially explain the diversion.

The strong decline in earnings per share suggests the market isn't using EPS to judge the company. The falling EPS doesn't correlate with the climbing share price, so it's worth taking a look at other metrics.

It is not great to see that revenue has dropped by 6.2% per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Get Nice Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Get Nice Holdings' total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Get Nice Holdings' TSR of 64% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Get Nice Holdings provided a TSR of 2.1% over the last twelve months. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 10% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Get Nice Holdings better, we need to consider many other factors. For example, we've discovered 2 warning signs for Get Nice Holdings (1 doesn't sit too well with us!) that you should be aware of before investing here.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.