The five-year loss for Health and Happiness (H&H) International Holdings (HKG:1112) shareholders likely driven by its shrinking earnings

Health and Happiness (H&H) International Holdings Limited (HKG:1112) shareholders should be happy to see the share price up 30% in the last month. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Five years have seen the share price descend precipitously, down a full 77%. So we don't gain too much confidence from the recent recovery. The fundamental business performance will ultimately determine if the turnaround can be sustained.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

See our latest analysis for Health and Happiness (H&H) International Holdings

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 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 the five years over which the share price declined, Health and Happiness (H&H) International Holdings' earnings per share (EPS) dropped by 4.3% each year. This reduction in EPS is less than the 26% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.15.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Health and Happiness (H&H) International Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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 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. As it happens, Health and Happiness (H&H) International Holdings' TSR for the last 5 years was -72%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Health and Happiness (H&H) International Holdings shareholders have received a total shareholder return of 33% over the last year. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 11% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Health and Happiness (H&H) International Holdings has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course Health and Happiness (H&H) International Holdings 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 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.