Did You Participate In Any Of Huaxi Holdings' (HKG:1689) Respectable 58% Return?

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market But Huaxi Holdings Company Limited (HKG:1689) has fallen short of that second goal, with a share price rise of 35% over five years, which is below the market return. Zooming in, the stock is up a respectable 10% in the last year.

View our latest analysis for Huaxi Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Over half a decade, Huaxi Holdings managed to grow its earnings per share at 13% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 11.80 also suggests market apprehension.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Huaxi Holdings' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Huaxi Holdings, it has a TSR of 58% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Huaxi Holdings provided a TSR of 15% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Huaxi Holdings better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Huaxi Holdings (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

But note: Huaxi Holdings 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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