Further weakness as United Energy Group (HKG:467) drops 30% this week, taking five-year losses to 75%

Some stocks are best avoided. We don't wish catastrophic capital loss on anyone. Spare a thought for those who held United Energy Group Limited (HKG:467) for five whole years - as the share price tanked 79%. We also note that the stock has performed poorly over the last year, with the share price down 70%. The falls have accelerated recently, with the share price down 45% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 30% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

See our latest analysis for United Energy Group

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

In the last half decade United Energy Group saw its share price fall as its EPS declined below zero. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of United Energy Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for United Energy Group the TSR over the last 5 years was -75%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in United Energy Group had a tough year, with a total loss of 70% (including dividends), against a market gain of about 2.2%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. 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. 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. Take risks, for example - United Energy Group has 3 warning signs we think you should be aware of.

United Energy Group is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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.