Would Shareholders Who Purchased Honworld Group's (HKG:2226) Stock Five Years Be Happy With The Share price Today?

It is a pleasure to report that the Honworld Group Limited (HKG:2226) is up 32% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 47% in that time, significantly under-performing the market.

View our latest analysis for Honworld Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Looking back five years, both Honworld Group's share price and EPS declined; the latter at a rate of 12% per year. In this case, the EPS change is really very close to the share price drop of 12% a year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price change has reflected changes in earnings per share.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Honworld Group's TSR for the last 5 years was -41%, 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

Honworld Group shareholders are up 14% for the year (even including dividends). But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. To that end, you should learn about the 3 warning signs we've spotted with Honworld Group (including 1 which makes us a bit uncomfortable) .

Of course Honworld Group 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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